Fiscal Outlook 2021: Budget to focus on boosting recovery

It said RM61bil is allocated for DE in 2021, up by 38% from 2020 to support economic growth, provide better quality of life and living environment focusing on education, healthcare, housing, transportation and public utilities.

KUALA LUMPUR: The government expects 2021 will be a transition year for the country’s economic recovery as it expects growth to be revitalised, together with restored investor and consumer confidence.

In the Fiscal Outlook 2021, it said the Budget allocation will focus on helping recovery including reviving business activities, developing public infrastructure, promoting upskilling and reskilling programmes.

The allocation will also focus on building the nation’s resilience against future economic shocks, including the possibility of a resurgence of Covid-19 cases.

“Expenditure will be prioritised towards targeted economic sectors to ensure a high multiplier impact and quality investment as well as to protect the well-being of the rakyat and to support businesses, ” it said.

In the report, it said the Federal Government has to balance the needs to support the recovery phase and ensure sound public finances,

It emphasised its focus was on fiscal reform and resuming its fiscal consolidation in the medium term.

“The efforts will be supported through the enhancement of good practices in expenditure management, which includes minimising leakages through closer monitoring of budget execution and increasing spending efficiency, ” it said.

A total of RM322.5bil or 20.6% of GDP will be allocated in the 2021 Budget. Of this, RM236.5bil of 73.3% will be for OE, RM69bil or 21.4% to DE and RM17bil (5.3%) for the Covid-19 fund.

As for sectoral allocation excluding the Covid-19 fund, a total of 37.7% will be for programmes and projects under the social sector, economic (18.3%), security (11%), and general administration (7.7%).

The balance of budget amounting to RM77.4bil (25.3%) will be for charged expenditure and transfer payments.

The top three recipients, constituting 38.5% of the total expenditure or RM117.5bil are for the Ministry of Education, Ministry of Finance and Ministry of Health.

Operating expenditure

On the OE, it said the allocation of RM236.5bil of 15.1% of GDP is slightly higher compared to the revised budget of RM226.7bil.

Emoluments will account for 35.7% of the OE at RM84.5bil due to provisions for annual salary increments for civil servants; retirement charges at 11% of OE at RM27.6bil due to pension payments and gratuity payments.

A total of RM39bil is for debt services charges of which 97.7% is for payment of coupons on domestic debs and the balance is for offshore loans.

It said supplies and services, or 13.9% of OE, is expected to increase by 8.9% to RM32.8bil, where nearly one-third is for the Ministry of Health to purchase medical supplies and repairs and maintenance of medical facilities.

The Education Ministry is allocated 16% of the OE for repairs and maintenance of school facilities.

Subsidies and social assistance – including subsidies for goods and services, incentives, to fall by 6.4% to RM18.9bil due to consolidation of cash aid programme.

Grants to statutory bodies will be allocated RM15.4bil, of which the bulk is for operational expenses.

Development expenditure

The government expects 2021 to remain a challenging year as it is the first year under the Twelfth Malaysia Plan 2021-2025 amid the ongoing Covid-19 pandemic.

As the country’s economy recovers, the DE will be channelled to programmes and projects with high multiplier impact.

Hence, it said RM61bil is allocated for DE in 2021, up by 38% from 2020 to support economic growth, provide better quality of life and living environment focusing on education, healthcare, housing, transportation and public utilities.

There will also be continued focus to boost the country’s competitiveness and productivity, improving ease of doing business and support growth and recovery of businesses as well as supporting the SMEs.

Of the total DE, it said RM67.3bil will be direct allocation and RM1.7bil for local to state governments and government-linked entities.

General administration sector will receive RM4bil as the government improves productivity and quality of public sector delivery system.

The funds will be mainly to enhance the digitalisation in government departments, refurbish and maintenance of government buildings of government buildings.

Major projects include the Malaysia Government Integrated Communication and Government Hybrid Cloud Service.