Malaysia is preparing a post-pandemic budget in anticipation of upcoming elections next year

Malaysia is poised to unveil an expansionary budget on Friday, aided by rising gas export prices, in order to stimulate post-pandemic recovery and set the way for an election as early as the middle of next year.

As part of a cooperation arrangement made with the opposition in order to maintain political stability as the country recovers from the COVID-19 crisis, Prime Minister Ismail Sabri Yaakob, who entered office in August, has committed not to dissolve parliament before the end of July 2022.

Opposition legislators have agreed to support or abstain on the government's budget for 2022 as part of the accord.

Malaysia lowered its economic forecast twice this year as new COVID-19 restrictions slowed the country's recovery; it now forecasts 3-4 percent growth in 2021, down from a previous forecast of 6-7.5 percent.

The Finance Ministry indicated in a pre-budget announcement in August that it would focus on post-coronavirus recovery and reforms, as well as offering assistance to people and businesses affected by long lockdowns.

Analysts expect higher development spending in 2022, as indicated by the government's pledge last month to allocate 400 billion ringgit (US$96.4 billion) for new and existing projects over the next five years https://www.reuters.com/world/asia-pacific/malaysia-targets-gdp-growth-45-55-per-annum-until-2025-pm-2021-09-27

Given the uncertainty surrounding the epidemic and the potential of an election being called next year, the government may also set aside contingency cash, according to Kenanga Investment Bank in a note.
Malaysia's next elections are scheduled for 2023.

With extra COVID-19 spending, the finance ministry estimates its fiscal deficit to grow to 6.5 percent to 7% of GDP in 2021, and has raised its statutory debt ceiling to 65 percent.

With this year's revenue forecast to be lower than predicted, it is also contemplating measures to increase tax compliance and fix leakages.