Unsure whether Prime Minister Muhidin Yasin’s political rivals will resist the temptation to pull him down, the Malaysian government is set to release its 2021 budget on Friday to mitigate the economic impact of the coronavirus pandemic.
Muhidin appealed for inter-party support when Congress voted on the budget on November 23rd. Analysts said defeat would be a vote of distrust and would put Malaysia into political instability.
The king of Malaysia told bickering politicians to prioritize the measures needed to overcome the crisis in Southeast Asian countries.
However, Muhyiddin’s position, which has survived with a two-seat majority since taking office last March, remains unstable as cracks in his coalition have become evident in recent weeks as opposition parties have made strong moves to replace him.
“Without the support of the partisan, it would seem like there would be a risk of being hampered by a friendly coalition partner, UMNO,” said Senior Researcher Oei at the Singapore Institute for International Affairs.
The United Malays National Organization (UMNO) is more accustomed to running the country, and the leaders have become increasingly unhappy with playing the second violin at the premier’s small Bersatu party.
Meanwhile, the Democratic Action Party, a Chinese national party that has emerged as the largest political party in the parliament due to the split between Malay tribes, said budget support will be decided based on whether the government has met the six demands. These demands include increased social security, deferred bank loans and extended wage subsidies, and guaranteed job creation.
The government has narrowed the focus of the budget to three main themes: public welfare, business continuity and economic resilience.
Finance Minister Tengku Zafrul Abdul Aziz told Malay Daily Sinar Harian on Sunday that the budget will be more expansive than this year’s RM297 billion ($71.88 billion) budget.
But as the economy is ruined by the coronavirus, economists who have already launched stimulus packages worth RM350 billion are questioning how much more the government can spend.
In August, Congress approved raising the government’s own debt limit by 5 percent to 60 percent of gross domestic product, but economists believe there is little room for more borrowing.
The government expects the fiscal deficit to reach 5.8% to 6.0% of GDP in 2020, given the forecast of an economic contraction of 3.5% to 5.5% this year.
Standard Chartered said in a study note, “With a 5% reduction in potential nominal growth and a 6% fiscal deficit in 2020, the debt-to-debt ratio would have already reached 59.6%.”
If economic growth recovers to around 8% in 2021, the government may have to reduce its fiscal deficit to 5% of GDP or to come up with alternative funds such as foreign borrowing, the bank added.