Budget 2021 ambitious, but economic analysts say Putrajaya could be bolder with spending amid Covid-19
Commenting on Budget 2021, REFSA’s Fredrik Paulus believes it is too soon to pursue any fiscal consolidation agendas and as such, advises loosening fiscal deficit targets and the introduction of bold measures to usher in a new economic paradigm, as proposed in REFSA’s most recent Policy Brief on Budget 2021.
The government should use the next few weeks until Nov 25, when a vote is taken, to gather feedback from all and be prepared to make changes for #Budget2021. The government should be prepared to incur a larger deficit to create jobs, deal with health crises across the board, and more social protection to vulnerable groups.
Budget 2021 appears to be based on the wrong assumption that our economy will bounce back strongly in 2021. It is too soon to pursue any financial consolidation agenda and Putrajaya should instead loosen its financial deficit targets.
According to REFSA, Budget 2021 may fail to make a large impact in creating jobs and ensuring future economic growth, two key issues the pandemic has particularly highlighted. The budget could have served as a bigger catalyst for economic activity.
REFSA notes that Budget 2021 was proposed with the aim of ensuring rakyat’s prosperity, business continuity and economic resilience. While we laud these admirable aims, the measures announced today may prove to be less impactful than what is needed in terms of job creation and ensuring future growth.
For decades, fiscal discipline and balanced budgets were the guiding light for finance ministers across the globe. That the institutions who were staunch defenders of this approach are now calling to abandon it is testament to the extent of the economic disruption we are witnessing. The upcoming budget is the best opportunity to start putting this new paradigm into practice.
Despite the public perception that Malaysia has a bloated civil service, there is a dire need for more healthcare workers to combat the coronavirus pandemic. Our Visiting Researcher, Farhana Roslan speaks on the government’s role in creating sustainable jobs of demand in the public sector as the nation rebuilds amidst the pandemic. For one, the health sector, along with education, is in need of more staff in the COVID-19 fight.
Education, healthcare and social welfare are key areas the government must address in Budget 2021, as these can contribute to both short- and long-term prosperity. At present, social welfare measures need to be implemented to combat rising unemployment and underemployment to mitigate effects on the economy, one being a change in consumption pattern.
Underemployment is rarely addressed compared to unemployment. Due to the MCO, industries have had reduced operating hours, which typically resulted in lower salaries and wages received, particularly in semi-skilled and low-skilled jobs. If left unaddressed, there is a risk Malaysia will be faced with higher levels of underemployment and unemployment compared to prior to the COVID-19 pandemic.
Belanjawan 2021 sepatutnya mempunyai defisit belanjawan lebih tinggi untuk pemulihan ekonomi lebih pantas. Kadar meminjam pada waktu ini dijangka akan lebih berdaya saing dan berada pada tahap terendah. Ianya tidak akan memberi keburukan kerana banyak negara dijangka melakukan perkara sama bagi merangsang kembali ekonomi yang terjejas kerana pandemik COVID-19.
The government should not be afraid of incurring a larger budget deficit and should borrow more to speed up economic recovery. Immediate efforts should focus on supporting those who have lost jobs or have reduced income. The creation of better jobs will be vital as we recover, and the health & education sectors are areas the government should stimulate.
Pengembangan sektor pendidikan awam dan penjagaan kesihatan awam akan mewujudkan peluang pekerjaan dan meningkatkan pendapatan ketika permintaan buruh sektor swasta dilihat lemah, serta membantu Malaysia mendepani dua cabaran jangka panjang, iaitu perubahan teknologi & demografi.
The creation of good jobs and securing livelihoods through decent pay should be of first and utmost importance in the nation’s economic agenda as we battle through this pandemic turned economic crisis as a “national mission” in a “whole of government” approach.
This will require a shift in mindset, moving away from fiscal discipline and balanced budgets, toward a new paradigm where the state fully assumes its role as catalyst for the economy and as anchor investor in uncertain but transformational ventures.
There are huge challenges societies have to face due to the COVID-19 crisis, and the state needs to think about how to play a more active role in creation of high-paying jobs.
Governments should not obsess over increasing debt with borrowing, as now is the time to spend to mitigate the effects of the Covid-19 pandemic
Our Research Director, Ivy Kwek speaks about Malaysia-China relations and the significance of the visit of the Chinese defence minister to Malaysia.