Budget 2022-A Delicate Balancing Act

It is time of the year again when the government would announce their annual budget for next year on 29 October. And it is also appears as a customs that economists and analysts alike would share their thoughts on what may unfold during that day in respect to the government stands on their fiscal policy and the ensuing measures that would be unveiled.

- Dr Mohd Afzanizam Abdul Rashid

The recent announcement on the 12th Malaysian Plan (12MP) should give us some clue on what could be the possible measures to be announced. In particular, the government has already set their eyes that the fiscal deficits ratio should be between 3.0% and 3.5% of GDP by 2025 as opposed to the prevailing fiscal shortfall of 7.7% of GDP during the first six months of the year.

Judging from this, the government’s hands are tied to the need to ensure fiscal sustainability will be the main agenda for the upcoming budget. This is given the fact that the country has already entered its first year of 12MP. In other words, the government does not have the luxury of times of not keeping their strict fiscal targets. Fortunately, the commodity prices have been music to their ear. The Brent crude prices is currently hovering at USD78 per barrel, a level that is significantly higher than the price assumption of USD43 per barrel when the Budget 2021 was tabled last year.