Budget 2021: Not a good time to further push up household debts – IDEAS

PETALING JAYA (Nov 6): Under the present circumstances, it would be unwise to further encourage households to increase their debts, said CEO of the Center for Market Education and Senior Fellow at Institute of Democracy and Economic Affairs (IDEAS) Dr Carmelo Ferlito (pictured), commenting on the Budget 2021 tabled this afternoon at the Dewan Rakyat.

“We know that no job is fully ‘safe’ at the moment and therefore a nudge towards prudence in spending would be more appropriate,” he told EdgeProp.my.

“The issue of homeownership is quite over-emphasised in Malaysia, where homeownership is almost at 77%. Instead, I am always concerned about the high level of household debt,” he added.

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The property sector was not in a good shape even before the pandemic. In the near future, there are mixed tendencies for the sector, and the market would not be too vibrant. Ferlito believes that it should not be the role of the government to support an industry that needs to sort out its own internal contradictions.

“If an industry is in ‘trouble’ due to entrepreneurial mistakes (which normally happens), it is not the task of the government to support it by reviving the consumption,” he said.

Ferlito thinks that it is an appropriate approach that Budget 2021 is not putting too much emphasis on driving property buying, as resources should be given to other industries suffering more badly than the property sector, owing to the pandemic.

Local purchase aside, Budget 2021 has also not done much on spurring foreign buying in properties. For example, there was no adjustment on foreign ownership threshold. Furthermore, the labour policies on expats are getting stricter.

“Malaysia is not playing a smart game in attracting FDIs. On the contrary, it is risking to lose some of the MNCs already in the country,” he said.

Overall, Ferlito deems the Budget to be one focusing more on containment of the virus, rather than driving economic recovery.

“Targeted actions are good, but overall it is not a budget that tries to liberate private resources for growth. The government’s target for 2021 economy growth is rather optimistic, it is achievable only without Covid-19 and with the country borders fully open,” he opined.

He is of the view that Budget 2021 is lacking an ambitious programme for a true recovery. He said that driving true recovery does not mean more spending, but quite the contrary.

“This budget is proof that you can put on the table a lot of resources without doing anything that can really spur the growth.

“What should be done are, for example, market liberalisations in industries dominated by government-linked companies, easing labour market regulations, making effort to collaborate with our neighbouring countries on international business travels... These are all measures which cost nothing but can spur growth,” he noted.

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