The 2022 Budget will be a litmus test as to whether the Ismail Sabri government is realistic and committed to address the economic woes plaguing the Malaysian economy or a wildly optimistic “mini-election” Budget to generate a feel-good factor to face the coming Melaka state general elections. The 2022 Budget should abandon the overly optimistic economic projections in the 2021 Budget, which not only failed to pull the economy out of its recession but affected economic confidence by missing many economic targets.
2020 was already a year of missed economic targets when Malaysia suffered a budget deficit of 6.2% of the GDP as compared to the initial projection of 6%, unemployment rate at 4.5% compared to the projected 4.2% and GDP growth at (-5.6%) compared to the projected (-5.5%). With continued Ministerial incompetence, political instability, constitutional crisis and the surge in the COVID-19 pandemic, Malaysia’s economic targets projected under Budget 2021 is likely to be a repeat of the missed targets of 2020.
For 2021, the budget deficit will not be scaled back to 5.4% as projected but likely increase to more than 7%. The unemployment rate will not be reduced to 3.5% but likely to increase to 5%. GDP growth is likely to be scaled down from the overly optimistic Budget 2021 projections of up to 7.5% to an anaemic 4% despite 8 economic stimulus packages of RM530 billion and the RM322.5 billion 2021 Budget, the largest in history. The World Bank even reduced the earlier forecast of our growth rate to as low as 3.3% for 2021.
In other words, our economy will not be normalized by the end of 2021 and will still be smaller than the end of 2019, the last year that PH was in power. PH and DAP had tried to assist the rakyat and businesses, especially SMEs, by compelling the government to agree to an additional RM45 billion fund injection and a three month interest waiver for the poorest 50% of the population by signing a Memorandum of Understanding with the Prime Minister.
One key aspect of the RM45 billion fund injection is the additional welfare aid and direct assistance, especially to the poor, pensioners, the disabled and fresh graduates to enable them to enjoy some sort of living wage. Bank Negara Malaysia (BNM) had previously defined the living wage as the level of income needed for a household to afford a minimum acceptable standard of living to meet a worker’s basic needs, ranging from nutrition, housing, childcare and education to savings, as well as having some additional discretionary income.
In 2018, the central bank had estimated that the living wage in Kuala Lumpur for a single adult was RM2,700, while for a couple without a child it would be RM4,500, and for a couple with two children, it would be RM6,500. BNM estimated that more than a quarter of households in Kuala Lumpur were earning below the living wage.
The government should be focused both on raising the average household income to RM10,000 over the next four years as well as raising the current median income of RM2,000 per month. Relying on the average household income could be deceptive, by ignoring the huge divide between the rich and the poor. With a median salary of RM2,000, this means that half of the population is making less than RM2,000 per month.
Just as the 12th Malaysian Plan(12MP) was a disappointment in unrealistically projecting the target growth rate of 4.5% to 5.5% for the 12MP by 2025 when the government admitted average growth under the 11MP was only 2.7%, the 2022 Budget should not be an ordinary Budget in extraordinary times. During the course of three Budget Consultations with the Finance Minister, PH has stressed on the need for the 2022 Budget to be people-centric and not politic-centric for cronies.