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PETALING JAYA: The World Bank has praised Budget 2021 initiatives in trying to strike a balance between providing support and stimulating the economy, but is warning of higher debt in the future.
World Bank Group Chief Economist Richard Record said that like governments around the world, the Budget tried to strike a balance between supporting lives and livelihoods today and investing in growth and economic recovery of tomorrow.
He said the Budget recognized the need for continued support to lives and livelihoods during a period when Malaysians, especially those in the bottom 40% of household income or the B40 group, are under a enormous stress caused by the Covid-19 pandemic.
“Clearly, this is the right time to maintain a countercyclical stance until there is a recovery,” he said in a statement.
He also called the measures to close the digital divide, including through the broadband subsidy, as well as the allocation to the National Digital Infrastructure Plan as “steps in the right direction.”
Record, however, noted that, like many governments around the world, Malaysia has exhausted much of its available fiscal space and will emerge from the crisis with a higher debt burden and contingent liabilities.
“This resulted in difficult intertemporal constraints on the government to further expand spending on short-term consumer relief and stimulus spending, which may leave the government less equipped to invest in lasting growth and recovery,” he said.
The Institute for Democracy and Economic Affairs (Ideas) said that the key measures of Budget 2021 were balanced in their coverage of the vulnerable segment of the population, economic and commercial activities.
However, he said that the 2021 Budget was short on a clear political direction to guide the development of the country after Covid-19.
“This was a golden opportunity for the government, in its inaugural Budget and the first serious political document of the year, to present a bold approach that would point the industry and the rakyat in its clear future direction.
“We urge the government and all members of Parliament to build consensus and provide political leadership on what is needed for Malaysia to reinvent itself and position itself to grow in the new post-pandemic normal,” he said in a statement.
While welcoming the government’s RM322.5b 2021 Budget to support the “revitalization” stage in the fight against health and economic crises, it cautioned that the government’s revenue collection estimates were optimistic and based on premise that there will be a rapid recovery in 2021.
Ideas also warned that the withdrawal of Account 1 of the Employee Provident Fund undermined the financial security of individuals and families, and said their long-term financial security needed to be considered.
He also expressed concern about the feasibility of certain budget measures involving government-linked companies, such as the short-term employment program (MyStep), which will offer 15,000 contract job opportunities.
Ideas praised protecting vulnerable groups, supporting mental health and preventing violence and substance abuse as a step in the right direction.
Angkatan Belia Islam Malaysia, meanwhile, questioned why the government did not extend the loan repayment moratorium until March next year, given the current economic recession and the level of unemployment.
Its president, Muhammad Faisal Abdul Aziz, said that an extension of the moratorium would help everyone, including those in the B40 and M40 categories, stabilize their financial situation as they enter a period of recovery.
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