Expect a ‘safe passage’ by lawmakers

• After more than a year, the Covid-19 pandemic continued to cause stress on the lives, livelihoods and businesses in our economy. Beside economic losses, this pandemic has severely affected the well-being of the rakyat and the government’s financial position with the fiscal deficit swelling to 6.5%–7.0% of GDP in 2021 while the debt ceiling has been raised to 65%.

• Focusing on short-term economic revitalisation efforts, Budget 2022 remains expansionary and agile with the aim of supporting the people and businesses, developing new shoots of growth and ensuring sustainable growth in the still challenging and uncertain environment. At the same time, being the first budget under the 12th Malaysia Plan 2021–2025 (12MP), this budget has unveiled measures to chart the pathway and to support the overarching aim of the plan.

• Hence, Budget 2022’s focus is on the 3 key themes – the people’s wellbeing, resilient businesses and a prosperous and sustainable economy
  • People’s wellbeing – protecting and uplifting the lives, livelihoods and badly affected economic sectors. Priorities are to help the third sector economy, vulnerable communities, create job opportunities and support the economic recovery with the gradual reopening from MCO 3.0.
     
  • Resilient businesses – rebuilding the public healthcare system; drive digitalisation, automation and technological infrastructure; and move towards high productivity driven by technology, innovation, creativity and skills.
     
  • Prosperous and sustainable economy – charting the pathway to achieve Sustainable Development Goals (SDGs), the 12MP and Shared Prosperity Vision 2030 with the aim of becoming more competitive with greater sustainability and inclusiveness.
     
• Driven by the gross national income (GNI) growth of 7.4% in 2020 (6.2% in 2021) with real GDP projected at 5.5%– 6.5%, the overall fiscal deficit is projected at 6.0% or RM97.5 billion in 2022 (-6.5% or RM95.8 billion in 2021).

• A key point to highlight in Budget 2022 is the 22.5% increase in gross development expenditure to RM75 billion. This would benefit construction and infrastructure activities as well as trade and industry.

• Meanwhile, the outlook for 2022 remains challenging and driven by uncertainty. Much will depend on: (1) the global outlook where growth is poised to be uneven; (2) vaccination coverage; (3) goods’ trade competitiveness since services are slow to recover; (4) labour market condition, especially underemployment and those out of the job market; (5) rising living cost and business operating cost; (6) higher loan default risk and bankruptcies; (7) foreign rating agencies outlook; (8) impact from a China slowdown; (9) implementation and regulatory issues; and (10) the political scenario – the 15th general election.

• We expect a “safe passage” by lawmakers at both the policy and committee stages of voting for this budget. This follows the signing of the Memorandum of Understanding (MoU) on Transformation and Political Stability between the government and the Opposition, especially the Pakatan Harapan coalition.

Source: AmInvest Research - 29 Oct 2021