The government is likely to have some space to pursue an expansionary budget for 2020 with higher spending and stimulus measures, said United Overseas Bank (Malaysia) Bhd (UOB).
Its senior economist, Julia Goh anticipated that the government will set aside between RM5 billion and RM8 billion as contingency funds next year to cushion the economy at a time when there is heightened external uncertainty and trade tensions.
She said the contingency funds will also help stabilise the economy in the event of more pronounced global slowdown.
“We think that inclusiveness based on the shared prosperity model will be at the core of the budget, hence, the government is likely to focus on the low-income group and small and medium enterprise (SME) (sector).
“Some measures that could be installed, including spurring tourism, incentives for green technology, infrastructure projects to spur construction activity, education to elevate labour productivity and perhaps some healthcare (measures) to reduce the public healthcare cost,” she told Bernama News Channel on Astro 502.
On the revenue front, she said UOB projects the federal government’s revenue to increase by 3.0 per cent to RM231.5 billion ringgit in 2020 even though no new taxes will be introduced.
She said this is largely due to a stable domestic economy that will support personal and corporate income taxes which contributed 47 per cent of the revenue.
“Although the no new taxes are expected next year, we are still projecting the government’s revenue to increase, largely premised on stable economy growth.
“This means that the government will still be able to set aside sufficient spending for education, healthcare, affordable housing and also to upgrade key infrastructure. We also expect the ‘Bantuan Sara Hidup’ cash aid will continue in 2020,” she added.
Meanwhile, to avoid any unnecessary changes to the 2020 Budget that could be disruptive to the economy, Goh opined that the government will have to adopt a conservative oil price projection, as well as measures to reduce the reliance and dependence on oil-related revenues.
The 2020 Budget, which will be tabled in Parliament on Oct 11, will be the final budget under the 11th Malaysia Plan (2016-2020).
It will also be a crucial budget that covers a heightened period of uncertainty amid fears of a deeper slowdown in global growth.