The first focus in Budget 2021 is the fight against Covid-19 from the perspective of health
The government, as expected, will embark on an expansionary budget to ensure the rakyat's prosperity, business continuity and economic resilience in these unprecedented times.
Prime Minister Tan Sri Muhyiddin Yassin said the first focus in Budget 2021 is the fight against Covid-19 from the perspective of health, hence, a substantial amount of fund would be channelled for the purpose of handling the pandemic and extending the necessary support to frontliners, especially in the form of infrastructure. “We will do it now and continue to do it until Covid-19 is over,” he told Bernama and local television stations here today ahead of the budget announcement on Friday, a first under the Perikatan Nasional government.
He stressed that the budget is a continuity from the four stimulus packages worth RM305 billion that have been disbursed since Malaysia was affected by the pandemic.
The most recent stimulus package was the additional assistance under the RM10 billion Prihatin Supplementary Initiative Package (Kita Prihatin) in line with the government’s efforts to boost economic recovery.
The Kita Prihatin package is an extension of the previous economic stimulus packages, namely Prihatin, Prihatin SME PLUS and Penjana worth a total of RM295 billion, or about 20 per cent, of the nation’s Gross Domestic Product (GDP), with an additional fiscal injection totalling RM45 billion by the government.
Bank Negara Malaysia has revised its 2020 GDP growth forecast to -5.5 to -3.5 per cent from -2 to 0.5 per cent previously, as the initial assumption was based on a lockdown period of only four weeks instead of seven weeks.
The economy is expected to recover and post a growth of 5.5 per cent to 8.0 per cent in 2021. “The budget, is part of the 6R plan embarked by the government, namely Resolve, Resilience, Restart, Recovery, Revitalise and Reform,” he said in the one-hour interview.
The government remains focus on ensuring that Budget 2021 as a priority to provides sufficiency of resources.“The government will continue to spend in a relatively difficult situation to boost the country's economy,” he said. He said the increase in the debt to GDP ratio from statutory limit of 55 per cent to 60 per cent now, gives ample room for the government to embark on an expansionary budget.
Maybank Kim Eng's Economic Research forecast a deficit of RM90 billion, or 6.0 per cent, of GDP versus an estimated RM95 billion, or 6.7 per cent, of GDP in 2020. The 2020 Budget announced last year was worth RM297 billion.
Besides health, the second focus area is to help the vulnerable, both individual and micro enterprises, especially those affected by Covid-19. “Third is to stimulate economic activities to provide job opportunities, business activities in addition to drive growth and recovery in 2021,” Muhyiddin said.
The government would also churn out incentives to attract Foreign Direct Investments (FDI) to further boost the country's economy.
“The situation at the global level is challenging and many countries are vying for investment in their countries. So, this is something we are paying attention to in the future. We want to launch a business infrastructure ecosystem.”
Hence, Muhyiddin said the incentives to attract FDI into the country would not only be focused in the year 2021 but also in 2022. For the first six months of 2020, Malaysia recorded RM64.8 billion worth of investments in the manufacturing, services and primary sectors. Of the total investments approved, the domestic direct investments (DDI) accounted for 69.8 per cent, or RM45.3 billion, while foreign direct investments (FDI) comprised the remaining RM19.5 billion.
Ranked 12th in the World Bank’s Ease of Doing Business 2020, Malaysia’s total approved FDI in 2019 amounted to RM82.4 billion. Muhyiddin assured that the 2021 Budget will be the most comprehensive budget that the government has ever embarked.