Sunday, October 24

In a first for Malaysia, Finance Ministry releases pre-Budget statement to show govt spending plan for next year

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Tengku Datuk Seri Zafrul Abdul Aziz

KUALA LUMPUR (Aug 31): The Finance Ministry released today its first-ever Pre-Budget Statement (PBS) ahead of the government’s parliamentary proposal on the country’s expenditure for next year in a bid to be more transparent.

Finance Minister Datuk Seri Tengku Zafrul Abdul Aziz said the publishing today of the PBS for the Malaysian government’s Budget 2022 is part of efforts to improve the annual budget preparation process.

“This PBS is the first in the nation’s history,” he said in a statement.

Tengku Zafrul said the PBS could also help boost investors’ confidence in how the country manages its finances.

In the 19-page PBS for Budget 2022, the Finance Ministry said transparency and extensive involvement by Malaysians in the preparation of the annual budget is one of the basic principles of good governance, which enhances public confidence especially among investors.

The ministry also said the inaugural PBS is in line with the proposed Fiscal Responsibility Act aimed at improving the “governance, transparency and accountability” of the country’s fiscal management.

“Therefore, the public is able to have a preliminary view of the direction, approach taken and expected initiatives that will potentially be in Budget 2022,” the ministry said in the PBS.

The ministry noted that the PBS will also improve Malaysia’s position in the Open Budget Index (OBI), with this global index by the International Budget Partnership (IBP) determined through a survey that measures transparency in the annual budget preparation process.

“Based on the IBP report for 2019, Malaysia recorded a relatively low score of 47 for budget transparency compared to regional countries, such as the Philippines (76), Indonesia (70) and Thailand (61),” the ministry said.

Commenting on the PBS’ preliminary overview of Budget 2022’s direction, Tengku Zafrul said next year’s government budget will be crafted based on three objectives or themes.

These three themes would revolve around the national recovery from the Covid-19 crisis, rebuilding of national resilience and catalysing reforms, he said.

“Protecting and driving recovery of lives and livelihood: Budget 2022 will drive the national recovery process to ensure that the nation successfully exits from the Covid-19 crisis, as well as continue the post-crisis recovery agenda to help lives, livelihoods and badly-affected economic sectors.

“Efforts to help vulnerable groups and generate new job opportunities will continue to be prioritised,” he said of the first theme.

As for the second theme of rebuilding national resilience, Tengku Zafrul said Budget 2022 will emphasise on “rebuilding the resilience and capacity of the nation’s public health system, enhancing digital and technological infrastructure, especially within the education sector, and facilitating the nation’s transition to high productivity industrial sectors based on automated technology and high skills”.

He said Budget 2022 will ensure that reforms are implemented while focusing on achieving the Sustainable Development Goals, the 12th Malaysia Plan and the Shared Prosperity Vision 2030.

“MoF is confident that the publication of the PBS will provide more avenues for stakeholders to provide feedback and contribute towards formulating a budget that is well-aligned to the needs of the Rakyat, as well as the country’s policies and national objectives,” he said.

The 12th Malaysia Plan is expected to be tabled on September 27, while Budget 2022 is expected to be tabled on October 29.

Earlier in the PBS, the Finance Ministry had among other things noted the International Monetary Fund’s (IMF) projection of the global economy to recover from a contraction of 3.2 per cent in 2020 due to the Covid-19 pandemic, with a projected bounce back to a positive growth at 6.0 per cent in 2021 and further growth by 4.9 per cent in 2022.

“Global economic growth in 2022 is projected to expand further by 4.9 per cent, driven by broader coverage of vaccinations globally that enables the reopening of economic sectors as well as the recovery of global trade and supply chains,” the ministry noted.

As for Malaysia, its economic growth for 2021 was originally forecasted in March to range between 6.0 per cent and 7.5 per cent, but this has been revised down by Bank Negara Malaysia on August 13 to a projected rate of between 3.0 per cent and 4.0 per cent.

The Finance Ministry noted that the revised 2021 economic growth rate for Malaysia despite impact from movement control order measures is based on the anticipated reopening of all economic and social sectors in the fourth quarter spurred on by the country’s Covid-19 vaccination progress, and the expected resulting positive business and consumer sentiments.

“Other factors which are expected to support Malaysia’s economic recovery include increased external demand particularly from major trading partners, the recovery in commodity prices, the transition to digitalisation as well as the implementation of infrastructure projects with high multiplier effects.

“Overall, all major sectors of the economy are expected to register positive growth in 2021 except for the construction and tourism sectors as a result of the containment measures put in place to curb the spread of Covid-19,” the ministry said.

The Finance Ministry said Malaysia’s trend of economic recovery is projected to continue well into 2022.

“The IMF and World Bank forecasted the Malaysian economy in 2022 to expand by 6.0% and 5.0%, respectively, a return to the pre-pandemic annual GDP growth trend,” it said.

The ministry noted expected positive economic growth drivers such as the services and manufacturing sectors, infrastructure projects with high multiplier effects that will support investment sentiment, and continued increase in external demand and recovery in commodity prices.

“The greater impetus in economic activity will revive consumer sentiment due to improved earnings prospects. As a result, the labour market is expected to recover in 2022 albeit at a more modest level than the pre-pandemic period, in tandem with the reopening of the economic sectors following the achievement of herd immunity.

“However, there are still some downside risks to the country’s economic growth prospects, among others the emergence of new Covid-19 variants that could impinge on the health system capacity and compel the government to extend movement control measures that would further postpone the opening up of economic sectors, a slower labour market recovery as well as policy uncertainties that could affect investment sentiment,” it said in outlining the economic outlook for Malaysia.

The full PBS can be found here on the Finance Ministry’s website. — Malay Mail