World Bank welcomes overall stance of Budget 2021


World Bank lead economist Richard Record said Malaysia’s economy continues to be based on sound fundamentals and the country has the necessary depth in resources and competitive advantages to emerge stronger from the crisis.

KUALA LUMPUR: World Bank welcomes the overall stance of the Budget 2021 proposals and recognise the need to continue providing support to lives and livelihoods during a period when Malaysians, especially those in the B40, are under enormous stress.

Its lead economist Richard Record said in a statement this is the right time to sustain a counter-cyclical stance until a recovery is underway.

“Malaysia’s economy continues to be based on sound fundamentals and the country has the necessary depth in resources and competitive advantages to emerge stronger from the crisis.

“In this regard, Budget 2021 is an important milestone in the country’s efforts to recover from Covid-19. However, the path to an economic recovery is subject to continued downside risks, ” he said.

Below is the statement:

Malaysia’s Budget 2021 comes at an especially challenging time. Covid-19 has triggered a global economic shock greater than anything the world economy has seen in a century.

We estimate that over 90% of the world’s economies will see a recession this year, including Malaysia.

Like governments around the world, Malaysia’s Budget 2021 attempts to strike a balance between providing support to lives and livelihoods today, with investing in growth and an economic recovery tomorrow.

We welcome the overall stance of Budget 2021 and recognise the need to continue providing support to lives and livelihoods during a period when Malaysians, especially those in the B40, are under enormous stress.

Clearly this is the right time to sustain a counter-cyclical stance until a recovery is underway.

We particularly welcome the emphasis on inclusivity with further measures to sustain social protection support to the vulnerable, including the expansion of the benefit levels and beneficiary coverage of the various existing and new cash transfer programs such as the Bantuan Prihatin Rakyat (BPR).

Measures to bridge the digital divide including via the broadband subsidy as well as allocation to the National Digital Infrastructure Plan (Jendela) are also steps in the right direction.

Additionally, the Budget introduced several new measures for upskilling, reskilling, and the employment and re-employment of workers, with particular emphasis on specific groups of workers including the youth, the long-term unemployed, the disable and those who have lost their jobs during the crisis.

The extension of the job search allowance by three months provides an enlarged safety net for retrenched workers as they seek re-employment.

These are useful steps in promoting job creation and re-employment which are important to facilitate a recovery from the crisis.

These necessary fiscal responses to the ongoing crisis, coupled with a persistent decline in government revenue, however, will pose a challenge to the medium-term fiscal outlook.

Like governments across the world, Malaysia has depleted much of its available fiscal space and will exit the crisis with a larger burden of debt and contingent liabilities.

This has resulted in difficult intertemporal constraints for the government to further expand expenditures on relief and consumption-supporting stimulus over the near term, which may leave the government less equipped to invest in lasting recovery and growth tomorrow.

As such, we welcome the announcements of several medium-term fiscal reform initiatives today, including the development of the Medium-term Revenue Strategy (MTFF), to address the fiscal legacies of the crisis, and to enhance the government’s revenue capacity to sustainably finance Malaysia’s long-term sustainable and inclusive growth agenda.

Malaysia’s economy continues to be based on sound fundamentals and the country has the necessary depth in resources and competitive advantages to emerge stronger from the crisis.

In this regard, Budget 2021 is an important milestone in the country’s efforts to recover from COVID-19.

However, the path to an economic recovery is subject to continued downside risks.

These notably include a slower than expected return to growth for the world economy leading to continued suppression of investors sentiment, the many uncertainties surrounding the development and deployment of Covid-19 vaccines and treatments, as well as the risk of enduring economic and social scars resulting from the recession.

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