KUALA LUMPUR (Sept 24): In just two weeks on Oct 7, the Finance Ministry will unveil Budget 2023, which will be closely watched given the many potential headwinds ahead. And as the 15th general election (GE15) is set to take place no later than July next year, many are anticipating that pre-election giveaways are a given.

On the economic front, uncertainties continue to abound two years after the Covid-19 pandemic, with key economies — including China and Europe — anticipating slower growth ahead as consumer demand slows amid the continuing war between Russia and Ukraine.

Global trade could suffer, and US Federal Reserve chairman Jerome Powell has portended more pain ahead. In a hawkish speech last week, he signalled more rate hikes ahead in a bid to rein in inflation, prompting forecasts of a looming recession in the US, with some economists predicting this would materialise even before the middle of next year.

Malaysia will not be spared if a global economic slowdown happens, given that it is an open economy and relies heavily on exports.

In theory, Budget 2023 ought to function as a blueprint for growth post-Covid-19. It is an arduous task given the headwinds ahead while government coffers are much lighter now compared to before.

A big plus is that Putrajaya will not need to take on extraordinary means and measures to stimulate and support the economy as it was forced to in 2020 and 2021 during the onslaught of the pandemic, like nearly all countries.

Even so, the debt incurred over the past two years has increased dramatically, made substantially worse by fast-rising interest rates, which make debt servicing a lot more costly.

With so little wiggle room, what can the government offer in the budget?

https://www.theedgemarkets.com/article/fiscal-constraints-grow-ever-tighter-right-balance-needed-budget-2023