The global economy is set to grow at an even slower pace in 2023 compared with 2022, as the uncertain outlook has magnified risks across all sectors. Not only that, a weaker global economy, with generally higher inflation and interest rates in most countries, would jeopardise governments’ fiscal space and revenue sources and, unfortunately, Malaysia is not an exception.
With the impact of the Covid-19 pandemic still lingering, the Russia-Ukraine military conflict has made matters worse as it is dragging down growth and putting additional upward pressure on prices, above all for food and energy. According to the Organisation for Economic Co-operation and Development (OECD), global growth is projected to remain subdued in the second half of 2022, before slowing further in 2023 to an annual growth of just 2.2%.
Compared with OECD forecasts from December 2021, before Russia’s aggression against Ukraine, global gross domestic product (GDP) is now projected to be at least US$2.8 trillion lower in 2023. Recognising these risks, Malaysia’s Ministry of Finance committed that Budget 2023 would continue to enhance the country’s recovery progress in 2022 while safeguarding the rakyat and businesses against current and future challenges.
Aligned with the objectives of Budget 2022, Budget 2023 continues to support growth and focus on reforms to elevate the rakyat’s well-being, income and social protection, improve the competitiveness of Malaysian businesses and move them up the value chain, as well as strengthen the nation’s resilience against future shocks and consolidate the government’s fiscal position. In order to achieve these objectives, Budget 2023 focuses on enhancing the momentum of economic recovery and strengthening the country’s economic resilience — all while implementing comprehensive reforms.
The various initiatives and strategies to increase the income of the rakyat has been continued in Budget 2023. Among others, the main initiatives focuses on continuing the upskilling and reskilling programmes, enhancing productivity through digitalisation of economic activities and ensuring a decent wage among citizens, including through a revision in the minimum wage. In addition, strategies to expedite automation and high value added in production activities have also been strengthened to encourage the creation of more high-paying jobs.
The education and health ministries continue to be recipients of the largest operating expenditure, reflecting the importance given to universal access to quality education and healthcare, with increased emphasis on educating talent to be future ready and focusing on preventative healthcare in the context of non-communicable diseases (NCDs).
Particular attention has also been given to more integrated, target-specific and effective measures to ensure that the welfare of the people is protected. The social safety net programmes and social protection system under Budget 2023 will be designed to protect the people from various vulnerabilities and economic shocks.
Overall, more targeted assistance will be undertaken in ensuring that the government is able to provide the optimum social safety net for vulnerable groups without compromising its fiscal position. For businesses, Budget 2023 focuses on improving the competitiveness of small and medium enterprises (SMEs), enhancing ease of doing business, speeding up the recovery of the tourism industry, promoting new growth areas and driving digitalisation and automation within industries. Malaysia aspires to become a high-income nation by 2025.
Considering the above-mentioned global economic challenges as well as the nation’s comparative advantage, current requirements and future trends, six main new growth areas have been identified to accelerate Malaysia’s transformation into a high-income nation. These new growth areas include the advanced electrical and electronics (E&E), aerospace, biomass, chemicals and chemical products, pharmaceuticals as well as digital economy.
Carrying on the success of Budget 2022
For the most part, Malaysia is well on the road to recovery in terms of headline economic numbers, thanks to the provisions in and foresight of Budget 2022. Malaysia had a strong first quarter this year, with GDP growth of 5%, and an even stronger second quarter at 8.9%. As such, Malaysia is believed to be on track to achieve, and even exceed, the forecast of a GDP growth of 5.3% to 6.3% in 2022.
Meanwhile, the unemployment rate dipped to 3.8% in June and 3.7% in July showing a declining trend for 15 consecutive months now. Malaysia’s trade performance also remained resilient, maintaining its growth momentum as trade data show double-digit growth for 16 consecutive months since February 2021. Following the systematic reopening of the economy, continued expansion of internal and external demand, and the reduction in unemployment, foreign investors appear to be more confident in Malaysia’s prospects.
The government allocated a total of RM332.1 billion for Budget 2022, with RM233.5 billion for operating expenditure, RM75.6 billion for development expenditure, RM23 billion for the Covid-19 Fund, and RM2 billion for contingency savings. The budget allocation was the largest on record for the country, with a focus on reviving every socio-economic segment. This conviction towards full recovery for everyone in every facet of the economy has been continued and even expanded in Budget 2023.
Evidently, this large allocation has successfully been channelled to beneficiaries through life-changing socio-economic initiatives such as the JaminKerja, Penjana HRDF, e-LATiH, SEDIA Place & Train and SemarakNiaga. Solehah Amin, 33, from Rawang, was one of the trainees under e-LATiH, which has helped her tremendously in terms of improving and upskilling herself to remain relevant in the workforce. “I believe that upskilling is of utmost importance, especially in this day and age because technology is always changing and the economy is always affected by the slightest changes in the world. And I have actually convinced my family to upskill themselves and remain relevant because that is so crucial. So, I feel like this is a great opportunity and a really great platform for us to explore further facets of our own skills and learn more about how we can advance ourselves,” she said.
Meanwhile, Scotrraaj Gopal benefited from the SEDIA Place & Train and obtained a Certificate of Recognition in Engineering, which paved the way for wider job opportunities. “A very useful assistance for someone like me is an initiative that can give me added value and can improve my soft skills in preparation to enter the field I am interested in. To be prepared to face any possibilities in the future, we need to be aware and seize the opportunities provided by the government,” he said.
To illustrate further, Lotuss Stores (Malaysia) Sdn Bhd has also benefited from Budget 2022 by employing a total of 1,600 workers through the Employment Incentive Work Guarantee (JaminKerja) initiative by the Social Security Organisation (Socso). “I think it is very easy for our company because Socso has a dedicated account manager appointed to work with Lotuss. So if there are any questions, or any issues, we can resolve them together,” said Alvin Low, Lotuss’ head of people.
Source : The Edge Markets