Budget 2022: Govt expenditure likely to focus on Covid-19 stimulus measures
KUCHING: The 2022 government expenditure is expected to continue to focus on Covid-19 stimulus measures to speed up the drive to fully exit the pandemic phase, the research arm of Kenanga Investment Bank Bhd (Kenanga Research) opines in its Malaysia 2022 Budget Preview.
With more space to raise debt thanks to the new higher statutory debt limit, Kenanga Research expects the government to allocate more spending on high multiplier infrastructure projects as well as sectors that are badly hit by the pandemic such as tourism, transportation, education and the retail sector.
“The primary target is to jumpstart these sectors and propel them back to the prepandemic levels,” the research arm said.
Other than that, Kenanga Research expects focus will be put on trade and industry, IT infrastructure, healthcare, as well as small and medium infrastructure projects specifically in rural areas.
“Taking the guidance for the 12MP and Pre-Budget Statement (PBS), development expenditure (DE) is expected to rise to a record RM75 billion in 2022 from an estimated RM68 billion in 2021.
“Apart from the recommencement of on-going mega projects (ECRL, Pan Borneo Highway, Johor-Singapore Rapid Transit System, etc), the big jump in DE is mainly to reflect the rehabilitation of government agencies (1MDB, Felda, Tabung Haji, etc).”
Kenanga Research gathered that in line with the National Investment Aspiration (NIA) launched by the government, guided by Malaysia’s Shared Prosperity Vision 2030 (SPV2030) and 12th Malaysia Plan (12MP), more enhancement will be given in Budget 2022 to attract quality and strategic investment, while reducing dependency on unskilled labour and spur technology transfer.
“Special incentive packages and grants directed to new growth areas are expected to receive top priority for the government.
“Nonetheless, policy clarity and direction from the government plays a crucial role to attract investment and this is expected to be addressed in Budget 2022.”
Meanwhile, Kenanga Research highlighted that higher allocation for the public healthcare system is expected to be given priority as the nation transitions to an endemic phase of Covid-19.
“Although healthcare spending has increased in line with the higher population, its ratio over gross domestic product (GDP), which stands at 2.3 per cent of GDP in 2020, remained below the average of 3.8 per cent of GDP among upper-middle-income countries.”
The research arm expects the government to allocate a higher budget for public healthcare especially to increase hospital beds and ICU capacity as well as equipment.
“Equally important is the need to further reduce the price of the Covid-19 testing kit to make it more affordable for the public while supporting the National Testing Strategy.”
Kenanga Research also gathered that as the Covid19 pandemic accelerates the adoption of the digital economy, it may also trigger the government to step up its plan for Malaysia’s digital transformation.
“Meanwhile, the government has launched the MyDIGITAL initiative early this year to further accelerate the country’s digital transformation.
“According to the Malaysia Digital Economy Blueprint, the government aims to attract RM70 billion in both international and domestic digital investments and open 500,000 jobs within the sector while contributing 22.6 per cent to GDP by 2025.”
Given the initiatives and targets outlined by the government which demonstrates efforts to boost the digital economy, the research arm foresees higher allocation and incentives for the sector in the upcoming budget.
After prolonged movement restrictions, the shutdown of tourism activities, as well as the closure of international borders amid elevated Covid-19 infections globally, Kenanga Research believed the government would allocate a reasonably significant budget for this sector for promotional activities and a special fund to assist small and medium enterprises (SMEs) in the related activities.