KUALA LUMPUR: ECONOMISTS and market observers say the 2019 Budget, the first under the Pakatan Harapan (PH) government, presents an opportunity for an overhaul and reform of the economy.
Scheduled for tabling in Parliament on Nov 2, the budget would likely be less than the RM280.25 billion “mother of all budgets” tabled last year by Datuk Seri Najib Razak.
Prime Minister Tun Dr Mahathir Mohamad had said the 2019 Budget would entail many sacrifices as the government grappled with reducing more than RM1 trillion in debts and liabilities it inherited from the previous administration.
“This budget is of sacrifice, everyone will have to sacrifice,” he said in an interview published yesterday.
“We can’t spend more than our earnings. We can’t entertain all sorts of requests. We have to accept that we must sacrifice.”
Responding to Dr Mahathir’s comments, Asian Strategy and Leadership Institute’s Centre of Public Policy Studies chairman Tan Sri Ramon V. Navaratnam said Malaysians must “cut a coat according to one’s cloth”.
“Squeezing the budget is good only if and when you squeeze it in the right places. The strategy should be to do more for the poor and incentivise the rich to boost the economy and generate employment quantitatively and qualitatively,” he told NST Business.
Ramon said monopolies, protective policies and race-based programmes should be reduced, if not removed altogether, albeit in stages.
“We need more competition, meritocracy and higher productivity that can be incentivised through more modern, updated and enlightened fiscal and monetary policies, and practices that are balanced and more equitable.”
Ramon said instead of mild fiscal adjustments and tinkering with the system, this year’s budget initiatives should go all out against corruption, wastage and cronyism.
“The government must focus on the poor regardless of race. The rich should not be pampered but encouraged to do better via more liberal policies.”
Ramon said income inequality was a serious issue in Malaysia, made worse by rising inflation.
Sunway University Business School economics Professor Dr Yeah Kim Leng said the likely lower 2019 Budget was in line with lower-than-expected revenue due to the change from the Goods and Services Tax (GST) to the Sales Tax and Services Tax (SST).
He said one of the key challenges included how the government could increase its spending efficiency, delivering the same quality of services with a lower budget.
“This can be achieved by reducing wastages and leakages.”
Yeah said to meet the people’s expectation — in terms of cost of living, including welfare and economic support — the government would likely prioritise social and economic sectors.
“Spending on social programmes, such as education, healthcare and support for the low-income group, will continue to be the priority.”
The government has reviewed some mega infrastructure projects since taking over.
He said the government should look at how to enhance the workforce’s productivity and ability to increase wages to reduce the inflationary pressure in property, education and healthcare.
AmBank group chief economist and head of research Dr Anthony Dass said the 2019 Budget adjustment would likely be about optimising expenditure and reprioritising investments.
“This can lower public debt and balance the fiscal book.
“The government will need to optimise its expenditure by focusing on priority projects or
investments that trickle down positively to the market and people.”
He said there would be limited room for incentives in the form of tax cuts for both households
and businesses, probably some indirect tax incentives for the middle income and below households.
“To lower the high operating expenditure compared with
development expenditure, among the key areas will be strong enforcement, which will reduce leakages and bribery, and put a cap on discretionary spending.
“The need to work closely with the private sector is vital in creating more jobs for Malaysians. Focus on foreign direct investments should be on those who can bring in more value-added investments. There should not be special privileges for specific countries.”
MIDF Research chief economist Dr Kamaruddin Mohd Nor said people-related projects would likely be prioritised.
“Targeted programmes to address and improve the wellbeing of B40 and M40 groups will continue to be implemented.”
Kamaruddin said the government was expected to remain committed to improving its fiscal standing, noting that the budget deficit would remain within this year’s figure. Improvement in both domestic and external operating environment could provide a breather for the government.