Malaysia: Pre-election budget almost a certainty for Malaysia – 4 Oct 2017

  • Kuala Lumpur: ONE thing is almost certain about Malaysia’s 2018 budget: with only 8-9 months left before the 13th Parliament is automatically dissolved, the fiscal blueprint is invariably going to be a pre-election budget geared to boost sentiment at the polls.
  • Analysts expect Budget 2018 to provide further impetus for the nascent recovery, with direct handouts to the bottom 40% of households and additional perks aimed at core voter groups that have traditionally supported the ruling Barisan Nasional (BN) coalition government.
  • Prime Minister Najib Razak indicated as much at a gathering on 3 Oct 17 with some 5,000 civil servants when he assured them of “good news” on 27 Oct 17 when he tables the 2018 Budget in Parliament.
  • To be fair, many economists consider public sector emoluments unsustainable as they now constitute 35% of government revenue compared to 23% a decade ago. While the pace of emoluments has grown 136% over the period, government revenue has expanded at a much slower 58%.
  • Earlier in Jul 17, Mr Najib had dished out an estimated MYR1.6bn worth of goodies including cash, incentives and debt forgiveness to Felda settlers – another large vote bank as they form a significant portion of voters in 54 Parliamentary constituencies that have traditionally supported BN.
  • In a monthly strategy report, Alliance Research observed that Budget 2018 would be the last before the 14th general election is due to be called and that past elections have coincided with strong consumer sentiment.
  • Even so, it expects Putrajaya to continue to maintain fiscal discipline and to keep the fiscal deficit at around 3% of GDP as the uptick in crude oil prices above the government’s assumption of USD45 per barrel oil gives it some wiggle room.
  • Other measures popular with voters are likely to include education, healthcare, and public transport proposals which also add to increased productivity. Initiatives to further assist small and medium enterprises, which form the backbone of the economy and employ some two-thirds of the country’s workforce, can also be expected.

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