Malaysia plans its largest budget to boost recovery from Covid-19

Malaysia is planning an even larger recovery budget than it did for this year, with a 6 per cent deficit projected for 2022 set to lift its coronavirus-ravaged economy by between 5.5 per cent and 6.5 per cent.

At more than RM332 billion (S$108 billion), Budget 2022 unveiled on Friday (Oct 29) will be the nation’s largest, surpassing the RM321 billion expected to be spent this year.

The 2021 deficit was initially planned at 5.4 per cent but a deepening Covid-19 crisis, which has seen more than 28,000 deaths this year, forced the government to unveil several rescue packages, and a shortfall of 6.5 per cent is now expected.

Gross domestic product (GDP), which shrunk 5.6 per cent in 2020, has rebounded in the first half of this year by 7.1 per cent, although growth is expected to slow to a full-year tally of between 3.0 to 4.0 per cent for 2021, according to Finance Minister Tengku Zafrul Aziz.

“Next year, we must focus on a recovery for all socioeconomic segments. Efforts to build resilience will be rolled out to strengthen business and healthcare capacity in facing coming challenges,” he said when tabling the budget in Parliament.

Datuk Seri Zafrul has insisted that the government still needs an expansionary budget as fiscal consolidation could derail an economic recovery.

In The Straits Times Connect webinar last month, he said: “We understand that the Covid-19 situation is dynamic. We didn’t realise in 2020 what will happen in 2021.”

He added: “With vaccination, at least we know that 2022 has to be, and can be and should be, a recovery year. But the situation remains fluid and that’s why we have to plan and pace ourselves.”

Budget 2022 sees RM233.5 billion being allocated to operating expenditure, RM75.6 billion set aside for development, a top up of RM23 billion to the Covid-19 fund and RM2 billion reserved for contingencies.

The Health Ministry was allocated RM32.4 billion – the second highest behind education – where RM4 billion was dedicated specifically to address Covid-19 and to boost public healthcare capacity.

Some RM8.2 billion is set aside for direct cash aid to the most vulnerable, with the number of recipients estimated at 9.6 million,  while RM4.8 billion in wage subsidies is aimed at securing 600,000 jobs. This is expected to bring unemployment down to 4.0 per cent from the 4.6 per cent last measured in August.

Since the pandemic hit early last year, Malaysia has launched eight relief plans worth RM530 billion, out of which RM80 billion has been direct fiscal injection.

The RM220 billion announced this year, with RM25 billion from the Treasury’s coffers, has yet to be fully utilised, according to the Finance Ministry.

Agencies