KUALA LUMPUR: The World Bank expects Malaysia’s Budget 2023 to be expansive and people-centric with the aim to meet the 12th Malaysia Plan goals of sustainability and digitalisation.
Apurva Sanghi, the bank’s lead economist for Malaysia, said the budget would likely allocate more resources to education and health while addressing seasonal situations such as the impending flooding and elections.
More spending and incentives to support the digitalisation drive for small and medium enterprises (SMEs) could also be expected.
“There are three principles (for the government to adhere to) - manage the budget within the limits of fiscal policy, align it to medium-term strategic priorities, and focus on the execution.
“The execution needs to be planned, monitored, and managed. This is an area where I think Malaysia can improve a bit in broad terms,” he told a virtual media briefing titled World Bank East Asia and Pacific Economic Update today.
The government allocated a total of RM332.1 billion for Budget 2022, with RM233.5 billion for operating expenditure, RM75.6 billion for development expenditure, RM23 billion for the COVID-19 Fund, and RM2 billion for contingency savings.
This was the largest on record for the country, with a focus on reviving every socio-economic segment in the country.
A total of RM32.4 billion was allocated to the health ministry - the second largest allocation after education - to continue the battle against Covid-19 via vaccination programmes and better public health service facilities.
However, Sanghi said Budget 2023 should not be overly expansive due to three reasons - the economy is doing well, the fiscal space is shrinking, and the global outlook is uncertain, especially for next year.
He said the world might edge towards a recession next year and with looming geopolitical risks, this could affect Malaysian export and trade accounts.
“Therefore, any announcement towards exponential rationalisation and in particular a targeted subsidy framework would be most welcome in this budget.
“The bottom line is, we expect Budget 2023 to be expansive but probably not as much as last year as the economy then was in a very different place,” he said.
Sanghi said there is a need for the government to mobilise revenue, but introducing the Goods and Services Tax (GST) in a rising inflationary environment might not necessarily be a good idea.
The World Bank believes the government would prepare and wait for the right time to launch major revenue reform initiatives such as the GST, he added.
Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz on Aug 6 said Malaysia still has some fiscal space to manage the challenges of price pressures given the country’s debt to gross domestic product (GDP) ratio was at 60 per cent.
He said although the statutory debt ceiling limit has been increased to 65 per cent of GDP from 60 per cent previously, the government remained steadfast in capping the fiscal deficit target at 6.0 per cent of GDP.-Bernama