Budget 2021 to align with 12MP to revitalise economy, says UOB
13 Oct 2020
Budget 2021 will likely align with the 12th Malaysia Plan (12MP) to address both short- and medium-term issues, while focusing on revitalising the economy under the fifth phase of the country’s 6R Economic Recovery Strategy, says United Overseas Bank (M) Bhd.
In a note today, it said the budget, to be tabled on Nov 6, will focus on four key areas – caring for the people, steering the economy, enabling sustainable living and enhancing public service delivery.
The budget would focus on revitalising the economy based on three objectives, namely, to continue protecting lives and livelihood; build on the current recovery momentum; and underline a combination of business-friendly policies, prudent fiscal management and effective transformation tools to build the country’s resilience against future economic shocks, said senior economist Julia Goh.
She said the bank expects Budget 2021 to be expansionary, with a projected fiscal deficit of 5.7% of gross domestic product (GDP) and debt-to-GDP ratio capped below the new ceiling of 60%.
The stimulus measures in 2020 (including wage subsidies, cash aid, automotive sales tax exemption, and property-related measures) may be extended into 2021, alongside new measures to support consumption, stimulate investments, accelerate digitalisation, improve job creation and wages, and promote environmental sustainability, said Goh.
The government, she said, has targeted to achieve economic growth between 5.5% – 8.0% in 2021, from -3.5% to -5.5% in 2020.
However, the pace of recovery hinges on the distribution of effective and safe Covid-19 vaccine, geopolitical risks, and the United States-China relations.
“Barring any negative surprises, we expect Bank Negara Malaysia to keep policy rates on hold in the near term. The coming budget will be the first budget during the Covid-19 pandemic and the first budget under Malaysia’s next five-year economic plan or the 12th Malaysia Plan (12MP, 2021-25).
“As such, Budget 2021 will present short- and medium-term initiatives to elevate the country’s economic development while addressing the negative lingering effects of the pandemic,” Goh added.