PETALING JAYA: Unemployment is still unflattering, businesses are still trying to get back on their feet and the income of many families remain scarred.

       Against such a backdrop, Budget 2022 will be the much-needed “booster shot” for the Malaysian economy to pursue a sustained recovery.

       Economists said additional fiscal support and new measures from the government through Budget 2022 would re-build market confidence and strengthen domestic demand.

       The allocation for Budget 2022 is expected to be the highest in history, making it the “mother” of all budgets.

       For comparison, the previous Budget 2021 was sized at RM322.5bil.

       Malaysian Rating Corp Bhd (MARC) chief economist Firdaos Rosli told The Star that Budget 2022 should be about planting the seeds for growth in the coming years under the 12th Malaysia Plan (12MP).

       “The first budget under the 12MP, Budget 2021, was crafted on a weak footing amid harsh lockdown in the second quarter of 2020.

       “Since Budget 2022 will be the 12MP’s second budget, it should act as a precursor to how the government intends to achieve its 12MP macroeconomic targets,” he said.

       With the country inching closer to the 15th general election, Firdaos expects the tendency to go strong on an expansionary Budget 2022 is high.

       “However, it is not just about spending priorities but also about how we finance spending.

       “The former is easy, but the latter is largely contingent on the global economy, which is not within our control.

       “Malaysians generally want the government to spend more each year, the same can’t be said for taxes,” he said.

       Meanwhile, Alliance Bank chief economist Manokaran Mottain said Budget 2022 was crucial in steering the economy towards a higher income nation status and a greater competitiveness.

       In addition, considering the urgent need to repair the labour market conditions, Firdaos said the upcoming budget should focus on creating high-skilled jobs in key economic sectors.

       “In line with this, Budget 2022 should also look at the upskilling and reskilling of workers in Malaysia to enhance productivity,” he said.

       Malaysia’s economic recovery in 2021 has slowed down due to the reintroduction of the movement control order, causing the economy to run below the optimal capacity.

       The return to pre-pandemic economic and business levels have also been delayed.

       In November last year, during the previous budget announcement, the government predicted a gross domestic product (GDP) growth of 6.5% to 7.5%.

       However, the forecast had to be revised downward to 3% to 4%.

       Centre for Market Education chief executive officer Dr Carmelo Ferlito believes that Budget 2022 is crucial in setting the pace for future recovery.

       After all, the 12MP has set an average GDP growth target of 4.5% to 5.5% between 2021 and 2025.

       With the 2021 growth likely to be below the 12MP target, it needs to be turbo-boosted from 2022 onwards.

       In formulating the budget, Ferlito said there is a need to choose between a government spending-fuelled recovery, which is unstable, or “unleashing” market forces for a sound and long-term recovery.

       “Furthermore, the budget will also have to set the way the government is committed to collect the money they need.

       “On this I often mention that we do not need more taxes but better taxes and better enforcement,” he said.

       MARC’s Firdaos also pointed out that tax reforms must take place in the 12MP period, although he does not expect significant changes in Budget 2022.

       “Since the government will likely push for higher private consumption as the primary growth engine in Budget 2022, I expect more tax rebates and cash aids this time around,” he said.

       Meanwhile, Ferlito warned that continued deficit spending would cause higher inflation, at a time when the economy was still struggling to chart a sustained growth.

       Deficit spending simply means spending more than the government’s projected revenue, hence financing the annual budget via increased borrowings.

       This year, the Federal Government’s fiscal deficit is expected to be between 6.5% and 7%, higher than the 6.7% in the aftermath of the 2008-2009 global financial crisis.

       The additional money supply created by expansive fiscal and monetary policies is exacerbating the risks of inflation and potentially undermining the future recovery, he said.

       “Under Budget 2022, the government must renounce the temptation to keep on overspending as giving into this temptation will pose the risk of a serious economic crisis in the near future,” added Ferlito.

       Socio-Economic Research Centre executive director Lee Heng Guie said the upward adjustment of the country’s self-imposed debt ceiling to 65% of the GDP had given some fiscal space to finance the deficit in Budget 2022.

       Nevertheless, he highlighted the need to embark on fiscal consolidation and undertake radical fiscal reforms through revenue strategy and expenditure review post pandemic.

       “The government needs to rebuild fiscal buffers for the rainy day as the increasing debt level will restrain the fiscal space to counteract any shocks,” he said.

       Despite the expectation of a budget with higher allocations, Lee expects the fiscal budget to reduce in 2022 to between 5.5% and 6% of the GDP.

       He also said that Budget 2022 was crucial in rebuilding the economy from the damage of the pandemic to become more resilient and to safeguard it from the next catastrophe.