Budget 2023 : aid for the rakyat or election carrots?

KUALA LUMPUR Oct 7 - All eyes will be on Parliament today as the leaders unveil its fiscal 2023 plan for the country and the rakyat.

What will Budget 2023 hold for the country's engines of growth or more importantly the rakyat?

Ismail Sabri to take center stage?

To start things off, who will table the budget today? Will it be Finance Minister Tengku Datuk Seri Zafrul Aziz?

Or will it be Prime Minister Datuk Seri Ismail Sabri Yaakob?

Traditionally, the budget which usually starts at 4pm will be presented by the finance minister who can sometimes also be the prime minister.

But today is a special day as it will be the first time that Ismail Sabri will crunch out the numbers and also drive home the point to his detractors that he is in charge.

This will also be Ismail Sabri's first budget since he became the prime minister and he may want to make an impact.

This year's budget is also interesting as it will be the last budget before the 15th General Elections or GE kicks off.

Will it be Zafrul or Ismail Sabri, and on a lighter note - what colour will their baju melayu be? Stay glued to the TV folks.
 

Will Parliament be dissolved?

At the top of the minds of Malaysians is will Parliament be dissolved the soonest right after the budget?

This rumour has been the talk of the town for the past few weeks leading to Budget 2023.

Ismail Sabri was also seen entering Istana Negara yesterday to seek an audience with the Yang di-Pertuan Agong. Will Parliament be dissolved soon? The drama continues.

The biggest budget ever?

Last year, the government budgeted a total of RM332.1 billion to finance a total of RM233.5 billion or 70.3% for operating expenses.

Will Budget 2023 be bigger than Budget 2022?

Alleviating the rising cost of living

The crux of the budget will likely comprise measures to help reduce the rising cost of living.

The government would likely continue to dish out cash assistance, subsidies and all sorts of investments for the rakyat.

Rolling out election goodies

Since the country is at the threshold of the 15th general election, it is likely that Budget 2023 will be dripping with election goodies and carrots so that the rakyat will vote for the ruling government.

Easing the plight of companies

During COVID-19, it is no secret that companies bore the brunt of the pandemic.

Thus, it is highly likely that Budget 2023 will comprise chunks of grants and loans to stimulate further the country's small and medium scale enterprises.

Budget 2023: the challenges

For the 2023 Budget, one of the main challenges faced by the Government in the preparation of the budget is the constraint to expand allocations.

As we already know, the Government's debt now amounts to RM1.045 trillion or 63.8 percent of the gross domestic product (GDP) as of June 2023. 

"Because of this, the Government had to allocate a total of RM43.1 billion or 18.4 percent of the estimated total revenue for service payment purposes for federal government debt for 2022.

Dr Muhammad Iqmal Hisham Kamaruddin said of this total debt, as much as RM29.4 billion involves offshore loans, while statutory debt accounts for 60.4 percent of GDP.

"Based on this situation, the Government is seen to have constraints in adding a large amount of new debt to finance the 2023 Budget due to the remaining statutory government debt limit of only 1.2 percent.

This is because the statutory limit of government debt cannot exceed 65 percent of GDP based on the Interim Act for Government Financing (Coronavirus Disease 2019 (COVID-19)) (Amendment) 2021. 

"Thus, it will be a challenging 2023 budget for the government," the Universiti Sains Islam Malaysia senior lecturer at Faculty of Economics and Muamalat told DagangNews.com.

Iqmal added the revenue constraint exists at a time when several current indicators point to the need for the Government to do more spending to compensate for weak economic performance. 

This includes an increase in the inflation rate reaching 4.7 percent in August 2023, a drop in the value of the ringgit to a level above RM4.50 per US dollar.

In addition to the projected subsidy expenditure for the year 2022 has more than doubled from RM31 billion to 77.1 billion.

This does not include the expenditure allocation for managing GE-15 which is expected to reach RM1 billion.

Economic recessions ahead?

The World Bank had warned that a global economic recession will hit in 2023 following the actions of central banks around the world to simultaneously raise interest rates to respond to inflation. 

The increase in interest rates this year has reached a level not seen in the past five decades and this trend is likely to continue until next year. 

On top of that, the International Monetary Fund (IMF) has lowered its global economic growth forecast for 2022 and 2023.

Malaysia is beginning to see the initial effects of the recession when the overnight policy rate (OPR) was raised for the third time in a row since May 2023 from 1.75 percent to 2.50 percent in September 2023.

In addition, the increase in inflation to 4.7 percent in August 2023 also witnessed an increase in the price index consumers especially for the non-alcoholic food and beverage group which increased by 7.2 percent.

Exports robust

However, amid the storm, there are also some positive indicators that will also affect the 2023 Budget this time.

Among them is an increase in the value of exports by 43.4 percent to RM270.4 billion in June 2022 compared to the previous year.

Total net foreign direct investment (FDI) inflows have also surged to RM48.1 billion compared to RM13.3 billion in the previous year and total trade has also exceeded the RM2 trillion mark for the first time in 2021, which is a 24.9 percent increase compared to the previous year.

In addition, the price of crude oil has also started to stabilize and is below the level of US$80 per barrel and the national unemployment rate has also returned to the level before the COVID-19 pandemic, which is 3.8 percent in June 2022, which is part of the positive indicators of the country's current economic recovery.

Ensuring a strong domestic economy

Despite the existing macroeconomic challenges and potential, the Government is also faced with challenges in ensuring the domestic economy remains strong under Budget 2023. 

This includes ensuring domestic economic issues such as food security issues, real estate market prices, supply chain logistics, labour issues, financial flows in the domestic market as well as the issue of eradicating the extreme poor continue to be strengthened. 

At the same time, support for small and medium-sized industrial traders (SMEs), the gig economy and the digital economy needs to be enhanced to ensure the sustainability of the domestic economy can be achieved.

Iqmal said in addition, several infrastructure-related mega projects that are capable of generating high investment returns and boosting the domestic economy should also be continued to ensure that the country can weather the challenges of the economic recession that is about to hit.

PM's hands will be full

It is clear that Ismail Sabri's hand will be full managing his detractors, the country and the economy.

The country meanwhile can only hope that its leaders remain level headed and not wrangle in political bickering to ensure the betterment of the rakyat - DagangNews.com