Budget 2022: What’s On The Experts Wishlist?
As we’re approaching the end of 2022, it also marks us going into our third year of living with the Covid-19 pandemic. By this point, the effects of the pandemic have been well documented, with wide-reaching implications on the economy, and even the lifestyle of Malaysians.
The presentation of Budget 2022 from the government is one of the most awaited events for Malaysians, to see what the government has in store for the people to help galvanize the economy.
But first, let’s have a look at the economic fallout caused by the pandemic.
The effects of the pandemic on the economy
At this point, it can be said that the Malaysian population has bounced back quite admirably from the hardships the pandemic put us through. With the vaccination rates inching higher each day and lockdowns eased, Malaysians are slowly getting back into the swing of things, eager to face the new normal.
This goes for our economy as well. Studies done by the World Bank and the International Monetary Fund projected that Malaysia’s Gross Domestic Product (GDP) will grow at 5% and 6% respectively, as our economic upturn is supported by the continued efforts from the government to gradually normalise our economic activities.
However, this does not mean that the pandemic didn’t leave long lasting effects on Malaysians. One of them is on unemployment rates. During the reinstatement of the lockdowns this year, the unemployment rate rose to 4.8%, which translates to 768,600 jobless Malaysians, according to statistics from the Department of Statistics Malaysia (DOSM).
Another sector that felt the full brunt of the pandemic is the Small and Medium Enterprise (SME) sector. According to a statement released by the Small & Medium Enterprises Association, two out of three SMEs do not foresee their business recovering this year, due to the effects of the prolonged lockdown.
With such big challenges on the social and economic front in the aftermath of the successive lockdowns due to the pandemic, how will Budget 2022 which is set to be tabled in parliament on October 29, 2022, address the pressing concerns of Malaysians?
Here’s what the experts have to say.
Targeted approach is needed
A more targeted approach to stimulate sectors that can provide domestic consumption is what Budget 2022 should be looking at, said Fung Mei Lin, PwC Malaysia Tax Partner and Entrepreneurial & Private Business Leader.
“Budget 2022 should explore a more targeted approach to focus on sectors that can help stimulate domestic consumption (such as domestic tourism, and retail) and encourage financial institutions to lend to those sectors that are able to present a viable business proposition.”
“This will not only help position businesses on much stronger footing to be able to benefit from the upturn but also help address issues such as growth (which should help translate into more revenue for the government through taxes), reducing unemployment and attracting investments on the basis of a strong ecosystem,” she highlighted.
Speaking to iMoney.my, she also emphasised the importance of following up on Budget 2021 plans, but also mentioned that a more innovative approach might be needed to combat current circumstances.
“Building on the various measures announced as part of Budget 2021 is key but the current circumstances may also require more innovative measures to drive growth including domestic investments, addressing the wellbeing of the people as well as reducing the wealth gap and inequalities,” she added,
Fung Mei Lin’s belief that creating more economic opportunities in order to improve employment is supported by Dr Shankaran Nambiar, the Senior Research Fellow at Malaysian Institute of Economic Research (MIER).
“Budget 2022 will be a challenging budget, as the government will have to juggle managing the damage done to individual Malaysians’ livelihood, while simultaneously rebuilding the economy.” – Dr Shankaran Nambiar, MIER.
“The health crisis has indicated that healthcare and the state of hospitals cannot continue to be ignored. Expenditure on housing and the improvement of hospitals will upgrade the state of healthcare, and it will also give a spark to the construction industry. This will have multiplier effects and create employment,” said Dr Nambiar.
“The budget will have to address the well-being of the Bumiputera and the B40. These are two areas which will figure heavily in Budget 2022. By and large, the economy will be improving with an uptick in movement and increasing economic activity, but there are companies and people who have suffered and are suffering from the onslaught of the pandemic who need support,” added Dr Nambiar.
Will more stimulus packages help the economy?
We have seen during the period of the pandemic how the government has announced a number of stimulus packages to help tide over the economic crisis that a lot of Malaysians are facing.
Which begs the question, does the current circumstances call for more of these stimulus packages?
According to PwC’s Fung Mei Lin, not really. She said that stimulus packages are inherently a short-term solution for a bigger underlying problem, and the government should be looking at a more sustainable approach.
“Stimulus packages should be used as a short-term measure as such measures may not be sustainable or sufficient.” – Fung Mei Lin, PwC Malaysia.
“Instead, the government should consider a more sustainable approach at creating medium to long term value such as allocating budgets for retraining the workforce in targeted sectors, and providing incentives for employers to create homegrown brands,” she points out.
She further added that grants and initiatives can be utilized to create economic impact in less developed states.
“To enhance socio-economic development in the less developed states, grants and incentives could be given to businesses that are able to create economic impact (such as creating employment in value added sectors or business opportunities using technology or to enhance the wellbeing of the people) regardless of industry.”
More support needed for SMEs and mid-tier companies
What about the flailing SME sector? Here’s what the experts have to say.
PwC’s Fung Mei Lin believes that improving their digital capabilities and upskilling should be paramount in the government’s efforts to help galvanise the SME sector.
“The government should encourage those industries/ businesses that are able to help and support the SMEs to adapt to the use of new technologies.”
“This includes helping SMEs understand how to onboard B2B or B2C sales platforms, introducing analytical tools for better management of stocks, and upskilling them on using social media to promote their products,” she observed.
She also added that extra tax breaks can also go a long way in helping SMEs in recovering from the effects of the pandemic.
“Greater tax breaks in the form of double deductions will certainly go a long way in spurring businesses to do this more efficiently and seamlessly,” stressed Fung Mei Lin.
This view is also supported by Dr Nambiar, who opined that Budget 2022 will need to introduce a way for businesses to reform themselves after the pandemic.
“On the industry side, the budget will have to help companies change their type of business or to put their pieces together post-MCO. Assistance has to be given for this purpose, particularly for those in the MSME (Micro, Small & Medium Enterprise) segment,” said Dr Nambiar.
Dr Nambiar also added that micro-enterprises are a specific sub-section in the SME sector that will need special support.
“Micro-enterprises will need special support. There also have to be measures for upskilling/reskilling since the post-MCO scenario would have people out of jobs and who need to upskill or reskill. Grants are a way of doing that,” added Dr Nambiar.
This is also supported by Fung Mei Lin, who mentioned that mid-tier companies are constantly overlooked, and needs special attention as well.
“Mid-tier companies in past years have not been given enough focus and yet this segment is the one that can potentially grow in a post-COVID-19 world. Most Budget proposals are either targeted at SMEs or larger businesses where the criteria to qualify may be out of reach for a mid-tier company.” – Fung Mei Lin, PwC
“Often, mid-tier companies are left with few options but to be creative to survive on their own. I hope Budget 2022 will have some goodies for the mid-tier companies where if they are consistently working in alignment with the country’s strategic direction, they can be supported through a lower tax burden as they work their way up the international supply chain,” said Fung Mei Lin.