KUALA LUMPUR: Maybank Investment Bank Research expects the Budget 2021 proposals to be announced this Friday will allocate more funds for social welfare and safety nets and also measures to spur consumer spending.
In its outlook report on Monday, it said the government would continue and enhance targeted supports to the vulnerable population (e.g. review existing Social Welfare Department’s monthly aid of RM200 to RM300) as well as on Covid-19-related healthcare expenses, including vaccine purchases.
It also expected Budget 2021 to contain measures to spur consumer spending (e.g. extend sales tax exemption for car purchases; another round of e-wallet credits; affordable housing).
As for the deficit, it expected it to be RM90bil or 6% of GDP, lower than earlier estimates of RM95bil or 6.7% of GDP.
Also, it noted that due to the fragile economic and domestic political conditions, tax hikes or new taxes are non-starters.
Due to the slump in crude oil prices, the research house also does not expect higher or special dividend from national oil company Petroliam Nasional Bhd.
Maybank Research said Budget 2021’s tax wildcard is windfall tax on glove manufacturers as Windfall Profit Levy Act 1998 were applied during economic recession/financial crisis, that is the plantations sector in 1998; power sector (independent power producers) in 2008.
Other measures are investment, namely in food security and relocation FDI to tap the opportunities from supply chain security and resilience; technology adoption (automation, digitalisation) to adapt to the new normal and boost productivity; and green investment for a sustainable long-term economic growth and development.
As for infrastructure projects, 2021 should see faster progress in existing major infrastructure projects (e.g. KVMRT2, KVLRT3, PBH, ECRL) plus scheduled rollout -and potential confirmation –of additional major infrastructure projects (e.g. Penang Transport Master Plan’s (PTMP) Penang South Reclamation Island A; Johor Bahru-Singapore Rapid Transit System (JB-SG RTS); KVMRT3; Putrajaya LRT/Monorail).
Maybank Research also sees digital infrastructure investment to feature prominently in Budget 2021, led by the National Digital Network Plan (Jendela) spanning 2021-2025, to optimise and improve existing digital infrastructure and connectivity (Phase 1: 2021-2022) and prepare the country for the transition to 5G (Phase 2: 2023-2025).
“There is the concern of Budget 2021 encountering political or legislative impasse amid the fragile Perikatan Nasional government’s hold on power.
Article 102 of the Federal Constitution provides Parliament the “power to authorise expenditure on account or for unspecified purposes” that is Parliament can approve an interim budget.
The research house said that has been a precent, pointing out the Budget 2000 was tabled on Oct 29,1999 but not approved as Parliament was dissolved on Nov 11,1999.
The dissolution was to make way for the 10th General Election on Nov 29,1999, which was won by the incumbent Barisan Nasional (BN) Government.
Parliament briefly reconvened post-election on Dec 20-23,1999, where the re-elected BN Government tabled an interim Budget 2000 under Article 102 before Budget 2000 under the Supply Bill was re-tabled on Feb 25,2000 and subsequently passed by Parliament.