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KUALA LUMPUR: The World Bank welcomes the general stance on the 2021 Budget proposals and recognizes the need to continue to support lives and livelihoods during a period when Malaysians, especially those in the B40, are under enormous pressure.
Its chief economist, Richard Record, said in a statement that this is the right time to maintain a countercyclical stance until a recovery occurs.
“Malaysia’s economy continues to be built on solid fundamentals and the country has the necessary depth of resources and competitive advantages to emerge stronger from the crisis.
“In this sense, the 2021 Budget is an important milestone in the country’s efforts to recover from Covid-19. However, the road to an economic recovery is subject to continued downside risks, ”he said.
Below is the statement:
Malaysia’s budget for 2021 comes at an especially challenging time. Covid-19 has caused a global economic shock greater than any the world economy has seen in a century.
We estimate that more than 90% of the world’s economies will experience a recession this year, including Malaysia.
Like governments around the world, Malaysia’s Budget 2021 attempts to strike a balance between supporting lives and livelihoods today, with investing in growth and economic recovery tomorrow.
We celebrate the overall position on the 2021 Budget and recognize the need to continue to support lives and livelihoods during a period when Malaysians, especially those in the B40, are under enormous strain.
Clearly, this is the right time to maintain a countercyclical stance until a recovery occurs.
We particularly welcome the emphasis on inclusion with new measures to maintain social protection support for the vulnerable, including expanding benefit levels and beneficiary coverage of various existing and new cash transfer programs, like the Bantuan Prihatin Rakyat (BPR).
Measures to close the digital divide, including through the broadband subsidy, as well as the allocation to the National Digital Infrastructure Plan (Jendela) are also steps in the right direction.
In addition, the Budget introduced several new measures for skills enhancement, retraining, and the employment and re-employment of workers, with special emphasis on specific groups of workers, including the young, the long-term unemployed, the disabled, and those with disabilities. they have lost their jobs. during the crisis.
The three-month extension of the job-search allowance provides an expanded safety net for laid-off workers while looking for a new job.
These are useful steps to promote job creation and re-employment that are important to facilitate recovery from the crisis.
However, these necessary fiscal responses to the current crisis, together with a persistent decline in public revenues, will pose a challenge to the medium-term fiscal outlook.
Like governments around the world, Malaysia has exhausted much of its available fiscal space and will emerge from the crisis with a heavier burden of debt and contingent liabilities.
This has resulted in difficult intertemporal constraints for 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 tomorrow.
As such, we welcome the announcements of several medium-term tax reform initiatives today, including the development of the Medium-Term Revenue Strategy (MTFF), to address the fiscal legacies of the crisis and improve the revenue capacity of the government to sustainably finance Malaysia’s long-term sustainable and inclusive growth program.
Malaysia’s economy continues to be built on strong fundamentals and the country has the necessary depth of resources and competitive advantages to emerge stronger from the crisis.
In this sense, the 2021 Budget is an important milestone in the country’s efforts to recover from COVID-19.
However, the road to an economic recovery is subject to continued downside risks.
These include, in particular, a slower-than-expected return to growth for the global economy leading to the continued suppression of investor sentiment, the many uncertainties surrounding the development and implementation of Covid-19 vaccines and treatments, as well as the risk of long-lasting economic and social scars. of the recession.
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