KUALA LUMPUR (Oct 6): It’s now up to the federal government to flex its fiscal spending power. Such sentiment encapsulates Socio-Economic Research Centre (SERC) executive director Lee Heng Guie’s briefing today on Malaysia’s economic outlook ahead of the nation’s Budget 2021 announcement on Nov 6, 2020 as the country grapples with the impact of the Covid-19 pandemic.
Lee, who was speaking during an online media briefing, said the country’s Budget 2021 calls for a targeted fiscal expansionary approach to support economic sectors that will take a longer time to recover from the impact of the Covid-19 pandemic.
“It’s now up to the federal government to flex its fiscal spending power. How much budget deficit spending and debt is it willing to commit in the tabling of the 2021 budget on Nov 6, 2020?” Lee said.
He said SERC expects the government to plan a 2021 budget deficit of between 5.5% and 6% of gross domestic product (GDP).
As the government’s debt ceiling has been raised from 55% of GDP to 60%, it will be able to borrow an additional RM70 billion to RM75 billion, according to him.
Lee said SERC has revised its 2020 Malaysia economic forecast, as measured by GDP, to a larger decline of 4% from a 3% contraction estimated previously.
For 2021, SERC expects the country’s economy to grow 5%, he said.
SERC’s revised 2020 economic forecast for Malaysia is within Bank Negara Malaysia's (BNM) contraction forecast of between 3.5% and 5.5% for the year.
According to BNM's statement on Aug 14 on the economic and financial developments in Malaysia in 2Q20, the country's GDP is expected to grow between 5.5% and 8% in 2021.
"The Malaysian economy is expected to recover gradually in the second half of 2020 as the economy progressively reopens and external demand improves," the central bank said.