Malaysia looks to spend big in 2021 in bid to boost recovery

6 Nov 20

The Malaysian government has presented an expansionary budget for 2021 as it attempts to steer its economy through the crisis caused by Covid-19.

Finance minister Tengku Zafrul Abdul said stark government action was necessary after lockdown measures led to the Malaysian economy being expected to contract by 4.5% this year.

He told parliament the economy lost 2bn-2.4bn ringgit (£370m-£440m) a day while the lockdown was at its height.

“Never before in modern human history has a pandemic struck with such a huge impact,” he said.

“Covid-19 has not only taken lives, it has also dragged down the country’s economy, as well as others around the world.

“There are no guidelines or any past clues that can be used as reference, because this is an unprecedented crisis.”

The government has boosted spending in the 2021 budget to more than 320bn – even higher than the 313bn it expects to spend this year.

Although revenue is expected to recover slightly, it will still remain well below its 2019 level.

The deficit, which is expected to reach 6% of GDP in 2020 – up from 3.4% last year – will reduce to 5.4% in the new budget, owing mostly to the expansion of the economy rather than a change in absolute terms.

Measures in the budget, which was presented to parliament but will be voted on later this month, include increasing welfare payments for the most vulnerable, including disability benefits, child benefits and assistance paying for internet or phone costs; raising tax relief on healthcare costs faced by individuals; as well as pay rises for frontline staff for the duration of the pandemic.

The government also added 20bn ringgit (£3.7bn) to its new Covid-19 relief fund, which will pay for health service costs, financial aid schemes and vaccine procurement.

Federal government debt will rise to 60.7% of GDP this year – above the 60% statutory limit the government recently raised from 55%.

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