KUALA LUMPUR, Nov 6 — There has never been a time when so many Malaysians expect so much help from the government's spending plans, and with no clear end in sight for the Covid-19 pandemic, Finance Minister Datuk Seri Tengku Zafrul Abdul Aziz is widely expected to table an expansionary Budget today to help steady the ship when he presents his speech in Parliament this afternoon.
In previous Budget plans, Malaysia could usually turn to trade and consider boosting exports of commodities and from the manufacturing sector if the economy was in trouble or showed signs of wobbling.
But the global Covid-19 pandemic has effectively taken that card away for now.
According to the World Bank, the pandemic has inflicted a massive shock that has caused the broadest collapse of the global economy since 1870.
More than 100 countries in the world including Malaysia are in recession, but there is still no vaccine, while lockdowns and curbs on travel means trade and the global economy are still in limp mode.
In Malaysia, the unstable political situation also means extra pressure on Tengku Zafrul to not just deliver a remedy for all economic problems but to also deal with the demands of various political parties who continue to fight for power and who are making demands with an eye on gaining support from the public.
Umno is for example pushing for the government to allow one-off withdrawals from the Employees’ Provident Fund which may sound like a good idea until one considers the fact that huge numbers of contributors actually have very little money in their accounts anyway.
There have also been calls from unions and other political parties for the moratorium on loans to be extended once again. If implemented such a move will certainly help but the reality is those who are having difficulties paying for their loans have already been offered a moratorium by some banks.
So what can we expect from Budget 2021?
In an interview published earlier this week, Tengku Zafrul suggested that the Budget plans will have to go against the conventional wisdom of cutting expenditure when revenue declines.
He said the government will need to spend more in the face of the continuing global pandemic.
It is almost certain the government will have to spend heavily on the Health Ministry as the country continues to deal with growing Covid-19 cases every day.
Where else can the government spend to swell the coffers of ordinary Malaysians as well as businesses, and to perhaps create jobs or just slow down the rate of unemployment which now stands at 4.7 per cent, the highest it has ever been since the 1980s?
The details will be revealed today but Malaysians can expect more money to enter the economy.
Infrastructure spending will likely increase as all signs are that pump priming is on the agenda for 2021. The key question will be on how much the government can afford and whether it will be enough.
More than 20 years ago when the Asian Financial Crisis brought Malaysia's super economic growth to a grinding halt, the government imposed capital controls and opened the taps to the economy through pump-priming projects while simultaneously buying up bad debt.
That saved Malaysia from resorting to help from the International Monetary Fund and there were few job losses.
This time the situation is much more dire.
And Tengku Zafrul will have to open the taps again so that Malaysia can spend our way out of recession.
Unfortunately, the stakes are higher this time and there is far less certainty about the outcome because the whole world is in the same boat.
The glimmer of hope on the horizon is probably the fact that China is showing signs of recovery and this will be good news for the Malaysian economy as long as our factories and other businesses can stay afloat long enough to reap the benefits of any potential regional recovery next year.
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