Malaysia: Budget 2021 seen focused on economic recovery

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting give a preview of the upcoming budget 2021, expected to be published on November 6.

Key Quotes

“Malaysia’s budget 2021 will be tabled on 6 Nov. This will be the first budget since COVID-19 pandemic and the first budget under the 12th Malaysia Plan (12MP, 2021-25). As such, initiatives in the coming budget will likely be aligned with the 12MP to address both short- and mediumterm issues. The budget aims to revitalise the economy under the 5 th phase of the country’s 6R Economic Recovery Strategy. It will focus on four key areas – 1) caring for the people, 2) steering the economy, 3) enabling sustainable living, and 4) enhancing public service delivery.”

“We expect budget 2021 to be expansionary with a projected fiscal deficit of 5.7% of GDP (2020F: 6.0%) and debt-to-GDP ratio capped below the new ceiling of 60%. The stimulus measures in 2020 (including wage subsidies, cash aid, automotive sales tax exemption, and property-related measures) may be extended into 2021 alongside new measures to support consumption, stimulate investments, accelerate digitalisation, improve job creation and wages, and promote environmental sustainability.”

“The government targets to achieve economic growth between 5.5%-8.0% in 2021, from -3.5% to -5.5% in 2020 (UOB forecast: +5.5% in 2021, -3.5% in 2020). The pace of recovery hinges on the distribution of effective and safe COVID-19 vaccine, geopolitical risks, and US-China relations. Barring any negative surprises, we expect Bank Negara Malaysia (BNM) to keep policy rates on hold in the near term.”

Credit: FX Street

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