KUALA LUMPUR: The 2009 Budget tabled in Parliament today is expected to be a caring one, as the government seeks to alleviate the hardship faced by the rakyat amid rising oil and food prices and their knock-on effects.

At the same time, it has to invest for future growth and ensure the long-term productivity and resilience of the nation.

Crude oil price hit a new high of US$145 per barrel last month, and while it has since come down to above US$110 per barrel, most economists believe prices will remain volatile for some time.

Malaysia's fuel subsidy programme has since been revised to better reflect market prices, and coupled with soaring global commodity prices, saw domestic inflation hitting a 26-year high of 8.5 per cent in July.

Global fuel, food and financial market turmoil will continue to be the main challenges to Malaysia's economy in 2009, and require a proactive stance by the government to mitigate their adverse impact.
The social safety net -- a collection of services that include welfare, healthcare and subsidies aimed at preventing people from falling into poverty -- will likely be a major focus.

Social assistance programmes may get increased allocation, or expanded to cover more rural, urban and hardcore poor, the disabled, single mothers, senior citizens and the Orang Asli.

Some analysts expect the people-centred budget to include income tax cuts, higher tax relief or rebates, lower Employees' Provident Fund contributions and other incentives to promote consumption and investments.

While the government can put more money in the hands of the civil servants through bonuses or other benefits, the plight of the growing middle-class employed in the private sector has been hitherto unresolved.

The 2009 Budget might address this indirectly, via incentives given to companies that provide benefits-in-kind or other perks to their employees.

Provision of affordable housing to low- and medium-income earners will remain a priority, as will the coverage of public utilities in rural and remote areas, particularly in Sabah and Sarawak.

Given the higher fuel prices, another major focus of the 2009 Budget will be to improve the quality and efficiency of public transport, especially in urban centres.

This might include assistance to private transport operators, purchasing more buses and trains or expanding their routes, and committing substantial investment in construction, upgrading and maintenance of roads, bridges and railway network.

The government should also continue to support the growth of small- and medium-sized enterprises (SMEs) with incentives and access to financing, as well as spur more entrepreneurial activity, particularly among unemployed graduates.

The transformation towards a knowledge-based economy as well as development of regional growth corridors will increase the demand for skilled and knowledge workers in the country.

In this respect, a big portion of the budget will likely be allocated for primary and secondary schools as well as for skills training institutes and institutions of higher learning.

With the increased spending on subsidies this year, the government is not likely to meet its target of reducing the fiscal deficit to 3.1 per cent. Some economists expect the figure to be closer to four per cent for this year.

The budget comes at a time of serious challenges to the nation's economy, but it is not entirely unchartered waters.

Malaysia faced similar crises of rising oil prices and inflation during the Arab oil embargo (1973-74), the Iran-Iraq war (1979-1980) and the Asian financial crisis (1997-98).