Malaysia unveils expanded budget to spur post-pandemic recovery

[KUALA LUMPUR] Malaysia announced an expanded budget on Friday aimed at jump-starting its pandemic-battered economy in 2022, according to the government's fiscal and economic outlook reports laying out the budgetary details.

Fresh Covid-19 lockdowns have dampened recovery, with the country slashing growth outlook twice to 3 per cent - 4 per cent this year, but a ramped-up vaccination drive and gradual reopening have boosted hopes of a quick turnaround.

The budget is also expected to set the stage for a general election that could be called by in the middle of next year.

Malaysia's next polls are due by 2023.

The government plans to spend RM332.1 billion (S$107.8 billion) in 2022, up from RM320.6 billion this year, despite lower-than-expected revenue and a widening deficit in 2021, one of the reports said.

"In the past 19 months or so, the government has repeatedly proven that despite our tight fiscal space, we delivered as best as we could," Prime Minister Ismail Sabri Yaakob said in his foreword to the government's 2022 fiscal outlook report released ahead of the budget.

"However, when it comes to strengthening our fiscal position, ultimately it depends on a sustained economic recovery." Malaysia has rolled out RM530 billion worth of stimulus packages to soften the pandemic's blow, as coronavirus curbs weighed on revenue - targetted to come in at RM221 billion this year, 6.7 per cent short of initial estimates.

But it expects economic growth to accelerate to between 5.5 per cent - 6.5 per cent next year, driven by further reopening of the economy and improved external demand, the report showed.

Its fiscal deficit is also expected to moderate to 6 per cent in 2022, after climbing to 6.5 per cent this year.

Next year's spending increase includes a hefty 21.9 per cent jump in development expenditure, to RM75.6 billion, while operating expenses will rise 6.3 per cent to RM233.5 billion.

Revenue is seen expanding 5.9 per cent to RM234 billion in 2022, including RM25 billion in dividends from state energy firm Petronas, unchanged from the 2021 dividends.

REUTERS