2021 budget offers crucial short-term support, say economists

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PETALING JAYA: Economists say the 2021 budget tabled by the government is set to help people and businesses overcome the short-term concerns brought about by the Covid-19 pandemic.


Universiti Putra Malaysia’s Abu Sofian Yaacob said the budget helps take care of the B40 community with various incentives offered to them, as they are among the worst-off due to the pandemic.

However, he told FMT that Putrajaya should adjust its spending priorities by mid-2021, reconsidering the incentives allocated for the M40 and business community to further stimulate the economy.

“For the short term, yes, the budget does help support people and companies. But they have to look for long-term solutions also. The B40 are getting a lot of incentives, but that can’t be the basis for the long term.

“Hopefully, by the middle of next year, the vaccine will be out and the economy will recover, and the people have income, regardless of what sources, whether it’s part time or from their own businesses.

“Then, I think we will have to realign our spending again. But, for the time being, considering these unprecedented times, (the budget) is not bad, even compared to other neighbouring countries,” he said.

Under the budget, Putrajaya has allocated RM30 billion in subsidy and direct aid for the people, including Bantuan Prihatin Rakyat for individuals earning up to RM2,500 and households up to RM5,000.

For the B40, they can opt for either a three-month loan moratorium extension or a 50% repayment cut for six months. For the M40, there is also repayment assistance for those who apply for it.

The Employee Insurance Scheme has also been enhanced, so workers get up to 4.2 times their last-drawn salary across nine months while looking for a new job.


He said the government should encourage the microeconomy industry, an easy sector to enter for unemployed Malaysians, adding that collaborations with the private sector could generate employment.

“For example, in the courier service, there are a lot of companies who are recruiting because they have a lot of business. At this point, the income may not be as high but at least there’s some income to earn.

“We’re not abandoning the traditional economy, but we’re moving forward, parallel with the new environment. We need to innovate and make adjustments to ensure our survival,” he said.

This, he said, would also stimulate the economy by giving people disposable income which will fall back into the economy when spent, while also generating revenue for Putrajaya through taxes.

Universiti Malaya’s Mohd Nazari Ismail said this budget was particularly tailored to resolve short-term problems, but expressed concern over the debts that the government would incur, saying this could lead to worse problems later in the future.

Nazari told FMT that everyone seemed to expect Putrajaya to bail them out, when the government’s debt situation was already high, with the budget set to push it to almost RM1.2 trillion.

He said that even without the pandemic, he would not have been surprised if the annual budget was a deficit one because of the government’s borrowing trend over the years.

“But sooner or later, the debt servicing costs will be too high and the government will face difficulties and may be forced to implement some form of GST (goods and services tax) in order to finance the expenditures,” he said.

“That is why we all need to figure out how we can create a situation where the government can avoid deficit budgets in the future, so that our accumulated debts can be reduced and hopefully completely eliminated.” – FMT

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