A small shift in an optimistic budget for gloomy days

SHAH ALAM - It may be a minute contrast from its predecessors but the slight change in the allocation for the operating expenditure of Budget 2023 speaks volume.

Why? Because unlike past budgets, the operating expenditure for Budget 2023 stood at 74.1 per cent; a small decrease compared to Budget 2022’s 75.5 per cent.

And such a decline – regardless of how small it is – is a welcome change; at least to the economists who talked to Sinar Daily.

“Over the years, the operating expenditure has recently quite consistently and moderately high level. So, for Budget 2023, to see slight decrease is positive in terms of fiscal consolidation,” said Professor Yeah Kim Leng of Jeffrey Cheah Institute on Southeast Asia.

Budget 2023 was tabled in Dewan Rakyat yesterday by Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz. A total of RM372.3 billion was allotted to it with RM272 billion being allocated for operating expenditure.

“You can see that the government spending has shifted to development expenditure, so it is a desirable shift given it will have a multiplier effect to the country, if it is effectively spent,” Yeah added.

In Budget 2023, the government set aside RM95 billion for development expenditure and this is a rather significant increment of 25.6 per cent compared to Budget 2022’s allocation – totaling to RM75.6 billion – for the same purpose.

“This is a good move,” Professor Emeritus Barjoyai Bardai from Universiti Tun Abdul Razak chimed in. “This is what we need during this period of economic situation. We need to have an expansionary budget.” Globally, times are tough.

Driven ever higher by repeated economic shocks, recessions are running rampant; and the International Monetary Fund (IMF) has yesterday, cautioned policymakers to take concerted action to cushion the impact.

When he tabled the supplementary bill, Tengku Zafrul spoke on how Budget 2023 was crafted to fortify Malaysia’s “economic fortresses” if recessions were to hit the country.

“This is the result of our preparations. This is Budget 2023,” Tengku Zafrul remarked, triumphantly.

But where and how will the government source the RM372.3 billion needed to finance the costly mammoth that is Budget 2023, is rather unclear.

The clearest soundbite – one freed from confusing financial jargon – that lightly elucidate such poser was that the government anticipated to collect RM272.6 billion and decreased its projection of 2023’s fiscal deficit-to-gross domestic product (GDP) to 5.5 per cent compared to the 5.8 per cent in 2022.

Such approach however, argued Yeah, was a tad risky given the current global economic slowdown.

“If there is global recession then our export-based sectors will be hard hit.

“We may even see slowdown in the country. Both income tax and other indirect taxes will also come down so the projected revenue will not be achievable.

“So that is the risk of overestimating the revenue if the global economy slows more than expected,” Yeah added.

As it is, two of the country’s major exports; namely palm oil and semiconductor have seen better days with the former suffering from massive foreign labour shortages and the latter facing unavoidable weakening demand and slower growth.

However, whether the slump of the two exports will pose significant trouble for the financing of Budget 2023 is something that Putra Business School’s Associate Professor Ahmed Razman Latiff believed will not happen.

“The country’s main income will continue to be from direct and indirect taxation with possible additional revenue coming from higher commodity prices such as petroleum.

“I think the government will reveal the projection [of revenue based on crude oil per barrel],” said Ahmed Razman.