The released of Malaysia’s latest budget for 2021 is aimed to ease Malaysian’s burden and rebuild the economy back to the pre-Covid-19 level. The country’s GDP growth is forecasted to reach 7.5% in 2021 to recover the 4.5% contraction in 2020. The government plans to focus on revitalising the country’s economy as well as supporting the SMEs businesses by intensifying on digitalisation.
The GDP of
emerging market and developing economies in 2021 is forecasted to reach 6% by
stable domestic demand and higher exports in which China will be leading in the
region. For the advance economies, it is expected to reach 3.9% through the
improved domestic market and increased trade activities in 2021.
The global inflation
is projected to reach 3.2% in 2020. There is a major declining trend observed
in the advanced economies from 3.5% in 2019 to 0.8% in 2020. The emerging
market and developing economies is expected to reach 4.7% in 2021.
Fiscal Deficit Target
The fiscal
deficit is set at 5.4% of GDP in 2021,
as well as the average of 4.5% in 2021-2023 have shown that Malaysian
Government aims to continue its track of fiscal consolidation to ensure the
country’s global rating is improving but not dropping.
Local Bond Market
The bond market is forecasted to be volatile with upward yields bias in 2021. The country has targeted to reach RM 84.8 billion on fiscal deficit and government bonds maturity of RM 73.7 billion and total gross issuance is projected to reach RM 160 billion in 2021. Bank Negara Malaysia will remain the monetary policy rate throughout 2021 at 1.75%. The low-interest-rate environment will attract more issuers.
Sectoral Views
For the
transport infrastructure projects, the government has allocated RM 15 billion
to enhance the current infrastructure, such as the Pan-Borneo highway project,
the Gemas-Johor Bahru double-tracking and electrification project, and Phase 1
of the Klang Valley Double Track project.
For the property
sector, a full 100% of stamp duty exemption is proposed on both instrument of
transfer and loan agreement for the first residential property by Malaysian
citizen, value up to RM 500,000, which is RM 200,000 more than 2020. As a
result, the home ownership will be further upsurged.
About 25
industrial areas will receive better coverage quality by the government under
the National Digital Network (JENDELA), which is a value up to RM 42 million.
In addition, it is great that the government will upgrade the network
connections across 430 schools across the country with RM 500 million from
JENDELA, to provide students with a better network. In a long-term strategic
view, the government will offer the highest allocation of the Budget to the
education sector.
Malaysian Communication and Multimedia Commission (MCMC) will
also allocate RM 7.4 billion between 2021 and 2022 to expand the broadband
connectivity to improve the quality coverage.
For the agriculture sector,
several key initiatives have been proposed by the government. For
example:
Extension of the Community Farming Programme – With an allocation of RM 30 million for this programme, semi-urban and rural communities will receive equipment such as fertigation kits.
Implementation of the Organic Agriculture Project – The government will help nearly 1,000 communities with the project allocation of RM 50 million.
Implementation of the e-Satellite Farm Programme – The allocation for this programme is RM 10 million in the form of matching grants up to RM 30,000. The programme will eventually help the Pertubuhan Peladang Kawasan (PPK) with 1 million of farmers and planters on purchasing agriculture equipment such as IoT and drones.
Vessel Modernisation and Capture Mechanisation Programme – Fishermen in zones A and B, will have their equipment, nets and boats being upgraded as Agrobank will provide RM 150 million to support the fishermen.
Implementation of Aquaculture Development Programme – Micro-entrepreneurs will receive support on purchasing equipment with an allocation of RM 10 million with matching grants up to RM 20,000.
For those high-value farming projects which are collaborated with State governments such as the pineapple farming in Johor and freshwater prawns in Negeri Sembilan will be benefitted as there will be an allocation of RM 100 million on the implementation of impactful farming projects.
Tax
The tax relief
limit on medical expenses for self, spouse and child on serious diseases will
be increased to RM 8,000 as well as tax relief limit on full medical check-up
to RM 1,000. For resident individuals, the income tax will be reduced by 1%
point for the chargeable income between RM 50,001 to RM 70,000. As a result of
the income tax reduction initiative, 1.4 million taxpayers are projected to be
benefitted. Other than that, the minimum employee EPF contribution rate will be
reduced from 11% to 9% in 2021 to increase the take-home pay for each
individual. For individual taxpayers with a disabled spouse, additional tax
relief limit for disabled spouse will be increased to Rm 5,000.
Equity Market Scene
The Prihatin and
Penjana economic stimulus initiatives are further fined tune and broadened to
help the rakyat who is affected by Covid-19. Incentives such as the
Industrialisation Digitalisation Transformation Scheme which is valued at RM 1
billion and RM 150 million in grants for the digitalisation and automation of
SMEs are proposed to solidify Malaysian business. Malaysian are allowed to
withdraw an additional RM 500 per month for 12 months for immediate needs.
There is also RM 1 billion of a special incentive package for high value-added
technology to support the R&D investment in electronic clusters including
aerospace. Concerning that, Bank Negara Malaysia (BNM) will also provide a RM
500 million of High Technology Fund to support high technology and innovative
companies.
Overall, the impact leans toward positive with favourable outcomes for the key sectors such as healthcare, construction and consumer. In Budget 2021, we can see that the Malaysian government has put efforts by allocating the most extensive national budget on record to help the citizens on reducing income inequality, especially the B40 group.
If you’d like to read about Johor Budget Commentary 2021, click here.
