Managing virus crisis, Malaysia PM Muhyiddin Yassin needs rivals to back budget

Uncertain whether Prime Minister Muhyiddin Yassin`s political rivals will resist the temptation to bring him down, Malaysia`s government is set to unveil a 2021 budget on Friday aimed at cushioning the economic impact of the coronavirus pandemic.

Muhyiddin has appealed for cross-party support when parliament votes on the budget proposals on November 23. Defeat would amount to a no confidence vote, analysts say, and would plunge Malaysia into more political instability.

Malaysia`s king has told squabbling politicians to prioritise passing the measures needed to help the Southeast Asian nation weather the crisis.

But having survived with a 2-seat majority since coming to power in March, Muhyiddin`s position remains precarious as cracks became evident in his own coalition as the opposition made strong moves to replace him in recent weeks.

"Without the bipartisan support, it would appear that he risks sabotage from his supposedly friendly coalition partner, UMNO," said Oh Ei Sun, a senior fellow with Singapore`s Institute of International Affairs.

The United Malays National Organisation (UMNO) is more used to running the country, and its leaders have become increasingly unhappy playing second fiddle to the premier`s smaller Bersatu party.

Meantime, the opposition Democratic Action Party, a predominantly ethnic Chinese party that emerged as the largest party in parliament due to the split among ethnic Malay parties, has said its support for the budget would depend on whether the government acceded to six demands. Those demands include an expansion of social security, an extension of bank loan moratoriums and wage subsidies, and guaranteed job creation.

The government has narrowed the budget`s focus to three key themes - public welfare, business continuity and economic resilience.

Finance Minister Tengku Zafrul Abdul Aziz said in an interview with Malay daily Sinar Harian on Sunday it would be a more expansionary budget than this year`s 297 billion ringgit ($71.48 billion) budget.

But having already rolled out stimulus packages worth 305 billion ringgit as the coronavirus ruined the economy, economists question how much more the government can afford to spend.

Parliament in August approved a 5% hike in the government`s self-imposed debt ceiling to 60% of gross domestic product, but economists see little, if any, leeway left for more borrowing.

Taking account of a 3.5%-5.5% economic contraction forecast for this year, the government expects the 2020 fiscal deficit to hit 5.8%-6.0% of GDP.

"With a potential nominal growth contraction of 5% in 2020 and a fiscal deficit of 6%, the debt-to-GDP ratio may have already reached 59.6%," Standard Chartered said in a research note.

If economic growth rebounds to around 8% in 2021 the government may have to reduce its fiscal deficit to 5% of GDP, or come up with alternative financing, like borrowing abroad, the bank added.