Budget will be an extension of stimulus packages, says economist

(FMT) – An economist believes that the federal budget to be tabled tomorrow will be an extension of stimulus packages and initiatives Putrajaya had introduced previously to cushion the impact of the Covid-19 pandemic.

Bank Islam Malaysia Berhad’s chief economist, Mohd Afzanizam Abdul Rashid, said the focus would still be on the Prihatin and Penjana packages as certain groups had yet to enjoy the benefits of these initiatives.

“The theme for the budget will revolve around Covid-19 as we do not know when we will see the end of this pandemic.

“And the initiatives announced by the government before this, like wage subsidies, have been spot on,” he told FMT.

Afzanizam suggested that initiatives under these packages be prolonged until next year because of the weak economy, which was still affecting the people.

He said Putrajaya should not place so much emphasis on taxes and the gross domestic product (GDP), and that it was “unrealistic” to aim for higher tax revenue in the current economic climate.

“We are looking at a wider fiscal deficit in the near future,” he said.

The Inland Revenue Board recently said it would be able to collect RM100 billion in taxes, about RM54 billion less than the target set previously, and Malaysia’s GDP contracted 17.1% in the second quarter of the year from a 0.7% growth in the last quarter, the lowest since the financial crisis in 1998.

Meanwhile, an academic from the Putra Business School said the government would table a deficit budget, with focus on economic recovery.

Ahmed Razman Abdul Latiff said the 2021 budget was the most “critical” one.

“The government’s main challenge is to address the loss of income,” he said.

Ahmed Razman also felt that Putrajaya should not rely on oil but should look into other sources of income or increase taxes or introduce a new tax regime.

He also doubted that the goods and services tax would be reintroduced as the public would not be in favour of it.

“The government can generate income via digital economy,” he said.

He suggested that the government introduce entrepreneurial programmes and facilitate the issuance of grants and business capital instead of short assistance like the Cost of Living Aid (BSH).