KUALA LUMPUR: A major focus of the 2017 Budget will be on raising the disposable income of Malaysians, said Prime Minister Najib Razak on Thursday (Oct 20), the day before he was due to deliver the Budget to parliament.
In the media statement, Mr Najib said that along with mitigating the rising cost of living, the Budget will also focus on providing more affordable houses and funds for maintenance, "substantial" measures on education and allocations for the provision of quality healthcare services.
He added that he will also make announcements on infrastructure, development, public transport and health, fiscal incentives for small and medium enterprises, and human capital and skills training.
Noting that some commentators have speculated that the budget would be an election budget, Mr Najib said it was instead a "commitment" budget.
“This is a commitment Budget. Others may put short-term political gain first, but this government will not," he said.
"We commit to ensuring that the economic fundamentals of the nation remain resilient and strong - including policy on deficit targets, spurred economic activity, and the long-term health of the financial system.
“We commit to being prudent and creative in optimising expenditure, to ensure delivery for the people. And we commit to a comprehensive, inclusive Budget that will fulfil our promises to the people.”
Mr Najib, who is also Finance Minister, said Malaysia’s economy is on course to grow between 4 and 4.5 per cent, at a time when advanced economies are expected to register growth of only 1.6 per cent.
Economists warn that Malaysia must stick to its fiscal deficit target of 3.1 per cent, as any slippage may trigger a credit ratings downgrade and hurt the local currency further.
"We must ensure that leakages continue to be tightened,” said Zakariah Abdul Rashid, executive director Malaysia Institute of economic research.
"This coming budget should focus on competitiveness,” said Lee Heng Gui of the Associated Chinese Chambers of Commerce and Industry Malaysia.
“We have to build enough firewalls so that the economy will continue to grow - and to make sure fiscal consolidation continues to be on track even though we have been in deficit in last 19 years.”
Some economists fear that the government may spend big in Budget 2017 at a time it can ill afford with government debts hovering just below the self-imposed debt ceiling of 55 per cent at 54.5 per cent and oil-derived revenue has taken a plunge .
They foresee populist moves with Mr Najib expected to call an election next year, despite one not due till 2018.
"He needs to make the people feel good if he wants to go for election next year, said Dr Zakariah of MIER.
Malaysians meanwhile have been looking forward to more cash transfer under the 1Malaysia People's aid, or BRIM, especially the bottom 40 per cent households that make less than US$1,000 a month.
Young mother Nani Abdul Rahman said she hopes there will be more help for young parents to cope with rising costs. "Prices have all gone up after the imposition of six per cent GST, but I have yet to see how the higher tax collection benefits me."
Izzati Qatrunnada, who works for the private sector, hopes the government can help to lower the price of property so that middle-income people can buy them.
"The government should focus on education and training because this is what Malaysia needs now," said her colleague Aniza Ibrahim.
Malaysian businesses hope that the government will lower personal and corporate income tax. At 24 per cent, Malaysia's corporate tax is higher than its regional peers like Singapore, Vietnam and Indonesia.
"While there is room for it to come down, I expect it to gradually reduce in 2018 given that the government is facing budget constraints," said Mr Lee who used to head CIMB research arm.
And then there’s the whole issue of building confidence to draw in investors. The 1MDB scandal refuses to die down, while the ringgit continues to bear the brunt. "We hope there will be closure to 1MDB, otherwise it will always be a drag," lamented Mr Lee.