Introducing Shared Prosperity Vision 2030 (SPV), launched by the Prime Minister himself on Oct 5 last year, reflects an overarching goal in a new era post Vision 2020. — Bernama photo
KUCHING: After admitting that Malaysia did not fully achieve the goal of becoming a developed nation by 2020 as expounded in Vision 2020, its architect Prime Minister Tun Dr Mahathir Mohamad said Malaysia has made a lot of progress since the launch of the vision in 1991.
But Malaysia still needs to plan ahead to ensure sustainable and equitable growth.
Introducing Shared Prosperity Vision 2030 (SPV), launched by the PM himself on Oct 5, last year, reflects an overarching goal in a new era post Vision 2020, as the country transitions towards the 12th Malaysia Plan (12MP) and eventually 13MP (2026-2030).
The economic size goal for the Vision set by the government is to achieve RM3.4 tillion (nominal) by 2030 or from an estimated RM1.6 trillion in 2020.
Based on calculations from Kenanga Investment Bank Bhd (Kenanga Research), that translates to an average growth of 4.5 to 4.7 per cent annually in real terms which is slightly above Malaysia’s potential output growth.
“Realistically, that would be a challenging feat given that the global economy is facing growing uncertainties brought about by the impact of higher trade barrier, technology, climate change, changes in demography, geopolitics and political change,” it said in a note yesterday.
“After sticking to a strict fiscal and debt consolidation approach in its maiden budget for 2019, the new Pakatan Harapan government has loosened its policy stance, becoming slightly more expansionary in its 2020 Budget.
“A big shift from being overly concerned and paranoid after discovering the previous government left the coffers with a huge debt as well as a system that is prone to corruption and abuse.
“It seems they’re getting a better handle of managing the fiscal balance sheet though the impact after the removal of the Goods and Service Tax would still haunt them, leaving a huge revenue shortfall of about RM20 to RM25 billion).”
Along with the slower growth prospect, Kenanga Research saw that the need to further rationalise expenditure and fix the burgeoning fiscal debt would hinder efforts to reduce the fiscal deficit.
“Our base case forecast for the fiscal deficit is 3.3 per cent of GDP for 2020, slightly higher than the official target of 3.2 per cent of GDP but narrowing from an estimated 3.5 per cent of GDP for this year.
“This is despite a steady rise in the allocation of development expenditure to RM56 billion in 2020 from an estimated RM53.7 billion in 2019 amid expected decline in revenues.
“To remain expansionary while setting a narrower deficit target the government has little choice but to reduce expenditure.”
Part of its new approach to better manage spending is to adopt zero-based budgeting and to make sure public spending is channeled towards projects with high-multiplier impact on the economy, the research house said.
“But such measures may only be truly effective in a base case scenario as the fiscal balance sheet may be subjected to stress in an economic slowdown or a shortfall in the collection of revenue especially when it is still highly dependent on oil revenue,” it forewarned.
Despite the macroeconomic respite, Kenanga Research expect the slightly higher fiscal spending to still play a bigger part to support the economy with greater targeted spending on value-added projects that improve productivity, provide higher multiplier impact and improve the welfare and employability of the B40.
“We expect the government would revive and speed up the implementation of key projects namely the MRT3, the Penang Transport Masterplan and perhaps even revive the High Speed Rail under the 12MP,” it believed.
“Though these projects may start from 2021, but a mid-year announcement of the 12MP is good enough to spur preparation for tender and stocking up of construction equipment inventory as well as hiring.”