‘It’s about the economy and jobs’

On the campaign trail: Tengku Zafrul and Datuk Seri Hishammuddin Hussein meeting people in Kuala Selangor. — Pic from Facebook

PETALING JAYA: The “erosive effects” of inflation, which is a concern across the world, can be kept under control by provisions in Budget 2023, says Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz.

He said there was a need for a mechanism to cushion and control the impact of inflation, so the government had allocated RM55bil in Budget 2023 for that purpose.

The government would have spent RM77.7bil this year to keep inflation at 3.3% in 2022, he added.

He said this was lower than various countries such as the United Kingdom (10.1%), the United States (7.7%), Thailand (6%), Singapore (7.5%) and the Philippines (7.7%).

“We must also understand that as a small and open economy, domestic inflation will be affected by global factors, such as global supply chain disruptions due to the war in Ukraine, global labour shortages which have affected supply of goods, as well as China’s strict Covid-19 policy.

“All these will lead to pressures on domestic inflation,” he added.

Although gross domestic product (GDP) growth averaged 9.3% in the first three quarters of this year, Tengku Zafrul said the most important result was to achieve growth that would create jobs for people.

“This is because even if unemployment has gone down, we must address the issue of underemployment, particularly among youth.

“Therefore, in Budget 2023, we suggested various measures to address this – such as developing 13 additional MYFutureJobs satellite centres, a RM150mil allocation for Socso (the Social Welfare Organisation) as part of the Hiring Incentive Programme (which is expected to create over 70,000 job opportunities), job mobility assistance for those who secure jobs outside where they live, 50,000 job opportunities through MyStep and many others.

“It is very important that growth must also generate higher wages that are matched by better productivity,” he added.

The unemployment rate has been going down for 14 consecutive months to hit 3.6% in September.

“All these and many other economic data are validation of our policies,” he said.

Tengku Zafrul added that the fact the economy recorded good growth of 14.2% in the third quarter of 2022 was a source of pride and satisfaction for him and his colleagues at his ministry.

“With these numbers, we are confident the 2022 GDP growth will exceed our 6.5% to 7% forecast.”

He said the GDP growth of 9.3% for the first nine months this year was the highest nine-month growth since 2000.

For next year, the economy is expected to normalise between 4% and 5% growth, mainly due to global challenges.

“Despite being lower than in 2022, this is still in line with our average pre-pandemic GDP growth which was 4.9% (2015 to 2019),” Tengku Zafrul said.

Factors that will drive growth would be increased domestic private spending, supported by greater economic and social activities including tourism-related activities, and further improvement in the labour market.

This also means better employment prospects, as well as sustained consumer and business confidence, he said.

“Secondly, major infrastructure projects such as the ECRL (East Cost Rail Link), Pan Borneo Highway, and MRT 3 – all these will further support the economic growth momentum as they sustain jobs.

“Thirdly, in terms of private investment, higher capital spending in tech-based manufacturing and digital-based services sectors like E&E (the electrical and electronics sector) and aerospace will also promote jobs growth,” he added.

As for Malaysia being in the “middle income trap”, Tengku Zafrul said there were measures in Budget 2023 to improve the labour market and the average income of the people.

He said Budget 2023 was responsive to all segments, including M40 households.

The 2% tax cut for taxable income of between RM50,000 and RM100,000 would benefit about one million taxpayers.

“For those earning RM250,000 to RM400,000, this range will be combined with the RM400,000 to RM600,000 range and be subject to a tax rate of 25%,” he added.

With this special income tax treatment, Tengku Zafrul said the M40 tax savings would be up to RM1,000.

This means that an estimated RM800mil is available as surplus income to be spent by the people.

“We also proposed the ePemula initiative for the M40, which is ewallet credits amounting to RM100 for M40 individuals earning less than RM100,000. Roughly eight million individuals are eligible to claim these ewallet credits, with an allocation of RM80mil.

“Looking ahead, in terms of reform, I’d like to share that since March 2020, I have always stressed the reform agenda. Reforms are the only sure way to address structural issues, raise wages, and ensure a better quality of life for our people,” said Tengku Zafrul.

He said the first step towards this was what Barisan Nasional had outlined in its manifesto, where the coalition proposed an Assisted Basic Income of RM2,208 for all working Malaysians, and also the 2% tax reduction for M40 households with income between RM50,000 and RM100,000.