Analysts have predicted that SMEs are very likely to be among the main beneficiaries of Malaysia’s Budget 2020, which is to be tabled on 11 October. This follows Finance Minister Lim Guan Eng’s foreshadowing of upcoming contingency measures to insulate the nation from the blowback of the ongoing US-China trade war. With trade tensions brewing between Japan and South Korea, the global economy is more uncertain than ever.
Among other things, an increase in government infrastructure projects may also help to stimulate construction activity. The expansionary impetus will have to be balanced against the task of narrowing the fiscal budget. The general expectation is for a fiscal deficit of 3.2 per cent of GDP for 2020, wider than the initial target of 3 per cent but nonetheless narrowed from 2019’s 3.4 per cent deficit.
Additionally, the government has signalled that no new taxes will be introduced. This is all-around good news for firms from all sectors, although corporate tax cuts itself are not likely to see any changes anytime soon. For SMEs, some things to possibly expect include greater access to financing, higher budget allocations to help boost entrepreneurship, and lower interest rates; particularly for those involved in smart farming.
Other measures that could be on the table include increased incentives to raise the adoption of technology and digital transformation; as well as more funding for green technology and green financing to increase sustainability and environmental friendliness.
UOB Global Economics and Market Research economists have also expressed their expectation of the government to set aside RM5 billion to RM8 billion as contingency funds, with the priority being on “high impact and high multiplier projects”.
“Should the contingency funds be fully utilised, Malaysia’s fiscal deficit may widen to around 3.5 per cent to 3.7 per cent of GDP next year,” they added.
RHB Research also said it expects a mini fiscal stimulus package, with grants and financing guarantees for SMEs among the possible measures.