Guan Eng doubts optimistic GDP projection, wants RM45b boost for Budget 2021

 

Former finance minister Lim Guan Eng wants serious steps, either in the form of an additional RM45 billion for Budget 2021 or extra four percent deficit to GDP to counter what he believes will be a slow economic recovery next year.

"This follows pessimism that Malaysia's GDP can grow by 7.5 percent in 2021, after a projected 4.5 percent contraction in 2020 due to the Covid-19 pandemic.

"The government has said that the strong rebound in GDP growth of 7.5 percent in 2021 will be driven by the anticipated improvement in global growth and international trade as well as the impact of the RM305 billion Kita Prihatin stimulus package," Lim said in a statement today.

However, he called the projected improvement unrealistic, saying the sources of GDP growth next year have all but disappeared.

"Global growth is expected to be weak next year, following the new wave of Covid-19 infections and the winding down of the government’s stimulus package next year with the Covid-19 fund being reduced drastically, from RM38 billion in 2020 to RM17 billion in 2021," he said.

"Further, the sharp decline in Malaysia’s gross fixed capital formation by 11.6 percent in the third quarter this year affects the economy’s potential growth and damages Malaysia’s competitiveness, since other countries in Asia are not experiencing the same phenomenon," the Bagan MP added.

Last week, Lim delivered a scathing verdict on Budget 2021, saying that the Perikatan Nasional government merely tabled an "ordinary" budget when the country needs an extraordinary budget to deal with the once in a lifetime crisis wrought by the pandemic.

While noting his proposal could cause rating agencies to downgrade the country's rating status due to poorer fiscal position, Lim, however, said it is more important to put money into the pockets of 33 million Malaysians adversely affected by the Covid-19 pandemic.

"The sharp decline in the gross fixed capital formation of 11.6 percent is a setback for economic confidence of future growth.

"To counter that, DAP proposes an additional RM45 billion fiscal measure equivalent to an extra four percent deficit, encompassing social protection, job creation, saving businesses and investing in the future with new technology and education," he said.

Lim called for five points of focus for the expenditure of the additional funds:

1. An immediate increase in monthly welfare aid from RM200-300 to RM1,000, including the unemployed (whose numbers are expected to hit one million) that will cost RM12 billion. This will provide an immediate safety net for unemployed workers.

2. An extension of the moratorium of bank loan repayments by another six months when it expires on Sept 30, costing RM6.4 billion that will help eight million Malaysian individuals and companies.

In contrast, the targeted bank loan moratorium extension and bank assistance after Sept 30 have assisted only 645,000 borrowers, which is only eight percent of the original eight million borrowers.

Many have complained that this does not benefit them but only financial institutions by merely extending the loan repayment period, thereby requiring even higher interest payments, said Lim.

3. Work hiring incentives over a period of two years, under Malaysia@Work of RM500 a month to employees and RM300 per month to employers to encourage them to hire local workers, as proposed by Pakatan Harapan in Budget 2020.

Expanding this scheme to cover 600,000 Malaysian workers and their employers would cost RM13 billion. This would also help the more than 500,000 youths who are unemployed.

4. The remaining RM4 billion should be spent on digitalising education, including buying laptops to provide online learning for students not able to attend schools.

5. RM10 billion should be given to provide a lifeline for new and existing businesses, loans and credit extensions, especially for the crippled tourism industry. Malaysia Budget Hotel Association (MyBHA) expects 40 budget hotels will be forced to close down, with about 2,000 workers losing their jobs if the government does not step in.

The RM1 billion Penjana Tourism Financing facility was very difficult to obtain, with three percent of the applications submitted by its 2,300 members being approved due to the strict rules imposed by the banks, Lim said.

He urged the government not to be "obsessed" with controlling the country’s debt levels and fiscal deficit and to embrace borrowing more money to save Malaysian jobs, businesses and livelihoods. - Mkini