Maybank Investment Bank (Maybank IB) Research expects Budget 2022 to be expansionary, supporting economic recovery and addressing COVID-19’s socioeconomic scarring effect with a budget-to-deficit ratio of 6.3%, which works out to a deficit spending value of RM103.9 billion.
The bank does not see the government increasing tax as well as imposing windfall tax, goods and services tax (GST) and new taxes, reported The Sun Daily.
Maybank IB believes Budget 2022 will support domestic demand recovery through higher gross development expenditure (GDE) of RM62.5 billion.
This is positive news for the construction and infrastructure segment as only RM53 billion or 77% of Budget 2021, compared to the usual above 90%, was realised due to the delays and disruptions caused by the containment measures, said the investment bank.
“We also expect Budget 2022 to be positive for property, auto and tourism sectors with extensions of fiscal incentives and tax exemptions for purchases of properties and passenger cars as well as domestic tourism spending,” it said as quoted by The Sun Daily.
Moreover, an additional RM45 billion is expected to be allocated to the COVID-19 Fund to address the pandemic’s socio-economic scarring effect and build resilience as the COVID-19 situation becomes endemic.
The bank expects this to translate into a continuation of measures like wage subsidies; cash handouts and financial assistance; training, reskilling and upskilling programmes; grants and funding schemes for MSMEs; job retention and worker-hiring incentives.
According to Maybank IB, the budget should use the “Pandemicrisis” to make reform and restructuring as well as to spur domestic direct investment within local production capabilities and supply capabilities for economic resilience and securities.
The “Pandemicrisis” should also be used to fast-track economic restructuring to boost competitiveness and productivity via automation, digitalisation, technology adoption, innovation and creativity that would be supported by higher GDE, which includes digital infrastructure capex.
The research house also sees the budget featuring sustainability with focus on social and regional developments, inclusive human capital, as well as on investing and developing green economy via the management of natural resources, environment and climate change.
However, it does not expect the government to table a return to GST or to introduce any tax hikes, windfall tax and new taxes such as carbon tax and capital gains tax.
“It’s too late to charge windfall tax on glove manufacturers as the profit super-cycle has peaked in H1 2021, although another round of voluntary contribution by the industry to Covid-19 Fund is possible. For banks, interest-free loan moratorium is a trade-off to windfall tax,” said Maybank IB.
Based on the pre-budget statement, the government’s revenue strategy for next year will focus on strengthening tax compliance, managing revenue leakages and reviewing tax incentives on investments, noted the bank.
The government’s decision to raise the domestic debt ceiling from 60% to 65% of GDP implies that the budget will be funded via debt and not major tax measures, it added.