Finance Minister Tengku Zafrul Tengku Abdul Aziz said the themes include “Resolve, Resilience, Restart, Recovery, Revitalise and Reform”, under the government’s “6R Strategy”.

“It should not be merely about the amount of funds disbursed, but whether the measures are impacting lives and livelihoods in a meaningful way. The results of these measures are also shared with the public on a weekly basis,” he said in his keynote address at the Invest Malaysia’s 2020 virtual series today.

He said the themes of the budget include caring for the people, steering the economy, sustainable living and enhancing public service delivery.

“This will require more effective engagement between the government, the private sector, civil society, and the Rakyat,” he said.

Tengku Zafrul said education, employment, social protection and mobility will be main features in the upcoming budget, the first to be unveiled by the Perikatan Nasional government which came to power in March.

He said digitalisation will be the key to spurring economic growth, adding that this was shown during the nationwide lockdown when individuals and companies switched to technology.

“In the first quarter of this year, 74% of the average daily trading value done by retail investors were transacted online,” he said, adding that online trading in general has increased to 41%, compared to 31% during the same period in 2019.

He added that there had been a huge increase of retail participation in the equity market, particularly from the youth segment using online channels.

He also said in the first quarter of this year, there was a 96% jump in Central Depository System account openings.

“Moreover, out of the 50,000 new accounts opened as of end April, almost half were youths. For many of today’s youths, technology is synonymous with infinite and instantaneous opportunities.”

Tengku Zafrul in his speech also touched on incentives to encourage environment, social and corporate governance (ESG) principles.

“I would like to challenge companies to use the Covid-19 crisis as a springboard to either strengthen their ESG agenda, or begin incorporating ESG principles within their business and operations.”

Meanwhile, speaking on current investor concerns, he said these generally involved three main areas: budget deficit and other macro indicators, the resilience and policies of Malaysia’s capital markets, and the government’s short-, medium- and long-term policies for the economy post-Covid-19.

Tengku Zafrul assured that the budget deficit, which may rise from 5.8% to 6% in 2020 due to the RM45 billion fiscal injection through the Prihatin and Penjana stimulus packages, would not have a permanent impact on government finances in the medium term as “most of these measures are either one-off or temporary”.

He added that the budget deficit must be evaluated in the context of Malaysia’s fiscal discipline and track record in economic management, citing the 6.7% deficit during the global financial crisis in 2009.

“We managed to reduce this to as low as 2.9% in 2017,” he said.

He also said the government remains focused on preserving fiscal discipline, adding that Putrajaya aims to reduce the deficit to below 4% of the country’s GDP over the next three to four years.

On Malaysia’s GDP growth, he said more than 150 out of 195 countries in the world are expected to post negative growth in 2020.

“Our growth for 2020 has been estimated to be within the range of -3.8% to 0.5% by various agencies like Bank Negara Malaysia (-2.0 to 0.50%), IMF (-3.8%) and World Bank (-3.1%).“

However, he added that Malaysia’s GDP growth in 2021 had been forecast within the range of 6.3% to 7.5%, subject to the country’s Covid-19 management.

“As Malaysia is an open economy, whether our growth will be a U-shaped or V-shaped recovery will also depend on external factors such as the recovery of our major trading partners as well as the restoration of global supply chains.”

He said the country’s capital markets had grown by an average of 5.1% annually over the last decade.

“We have seen positive sentiment in our equity market supported by both domestic retail and institutional investors.”

As of end-June, he said, the FBM KLCI has shown resilience relative to other countries, coming up to the top among other emerging markets in Southeast Asia.

As the market closed yesterday, the FBM KLCI was close to recouping over RM200 billion in market capitalisation, taking it back to levels recorded at the beginning of 2020.

Tengku Zafrul said in May, there was also a 65% increase in average daily trading value compared to April.

“This reflects investors’ optimism in the gradual reopening of Malaysia’s economy, underpinned by a low interest rate environment.

“We believe that investors returned to the Malaysian markets in May to invest in companies that would benefit not just from the reopening of the economy, but also from the raft of stimulus measures and tax incentives offered by the government.”

On government policies for economic recovery, he cited short-term recovery measures under the Penjana stimulus package aimed at encouraging and attracting investors.

Under the package, he said there were corporate tax exemptions for 10 to 15 years for the relocation of manufacturing facilities from overseas to Malaysia, for businesses to take advantage of supply chain disruptions and to make local supply chains more resilient.

He also spoke of the 100% Investment Tax Allowance for three years for new investments in manufacturing sectors, and the expedited approvals for manufacturing licences for non-sensitive industries within two working days.

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