Government has fiscal space to introduce new injections, says think tank

KUALA LUMPUR: The government still has the fiscal space to introduce substantial new injections, as suggested by the Pemerkasa package introduced recently, which mostly extends the existing measures, said think tank Research for Social Advancement (Refsa) yesterday.

Its researcher Jaideep Singh said the way out of the pandemic-induced contraction was to implement more directed, strategic expansionary fiscal policy measures to promote consumption and crowd-in private sector investment, not to make unsubstantiated claims government’s fiscal situation.

“Now is not the time for alarmism. We can already expect an increase in government revenue beyond Budget 2021’s forecast, with Brent crude oil climbing to over US$60 per barrel today from the US$42 per barrel assumed during the preparations for the budget,” he said in a statement yesterday.

At the time of writing, Brent crude rose 1.02% to US$64.32 per barrel.

Jaideep said a simple

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way

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to contextualise the government’s fiscal health was to look at the overall fiscal balance on the difference between government revenue and expenditure as a share of gross domestic product (GDP).

“Granted, the stimulus measures have led to higher spending amid a smaller revenue base, with the estimated fiscal balance standing at 6% of GDP in 2020 and potentially rising to 6.5% this year from 3.4% in 2019, according to an extrapolating from the Economic Outlook 2021,” he added. – Bernama