KUALA LUMPUR: The 2018 Budget will most likely address the rising cost of living through various targeted incentives for middle- and low-income groups.
Given that it is a pre-election budget, OCBC Investment Research expects many “goodies’’ to be handed out, centering on how the government could provide more assistance to the middle- and low-income segments, as well as small- and medium-sized enterprises.
“With social policies likely to centre on the rising cost of living, we expect the budget to focus on targeted incentives for households, especially in the middle-low income groups or B60, as well as lending support to civil servants,” the research firm said in a recent report.
Noting that the government had already distributed RM5.9 billion and RM6.8 billion in 2016 and 2017 respectively through the 1Malaysia People’s Aid (BR1M), OCBC Investment Research said similar aid would recur next year with an allocation above RM7.5 billion.
More social “goodies” may be expected in three key areas — education and training, affordable homes and upgrading of healthcare services.
These could include higher expenditure on healthcare and education subsidies into next year, similar to what was seen in the previous election budget.
The research firm said there might be more allocations for the Permata programme (early education system for gifted children), as well as to increase the number of scholarships under the MyBrain15 programme to provide support for professional education in the nation.
Affordable housing schemes can be expected, in view of the rising property prices and first-time house buyers’ struggle in obtaining loans.
“The aid could come in the form of reduced Goods and Services Tax (GST) payment on housing materials, while other targeted exemptions on stamp duty and the provision of special end-financing scheme could aid house buyers.
“Lastly, healthcare subsidies may also be extended to defray rising medical costs, as well as providing a sizeable allocation to improve healthcare quality,” it said.
“In 2018, we expect the budget to address the rising cost of living through various targeted incentives for the middle- and low-income groups through the BR1M programme.
“The emphasis on economic development that uses technology, such as robotics and cloud computing, may be expected as well.
“To finance the higher expenditure, we foresee the government to see higher GST collections (up to RM47.6 billion from 2017’s estimate of RM47.1 billion),” the firm noted.
Elsewhere, higher corporate and income tax revenue may also be expected in line with a relatively benign economic environment into 2018, it said.
Malaysia is expected to project a budget deficit of 2.9 per cent of gross domestic product (GDP) in 2018, from an estimated three per cent this year.
The International Monetary Fund (IMF), in a recent report, commended the resilience of the country’s economy, which reflected sound macro-economic policy responses in the face of significant headwinds and risks.
“While Malaysia’s economic growth is expected to continue in 2017, weaker-than-expected growth in key advanced and emerging economies or a global retreat from cross-border integration could weigh on the domestic economy,” IMF noted.
Independent economist and writer Mushtak Parker, however, said there might still be some inflationary pressures albeit these would be balanced out because of the impact of positive economic developments in Asia in general.
“Consumer prices in Malaysia, according to the IMF, are expected to rise to 3.8 per cent in 2017 before falling sharply to 2.9 per cent in 2018.
“On the other hand, the country’s current account balance remains stable and is projected at 2.4 per cent of GDP in 2017 and 2.2 per cent in 2018.
“There is also good news on the unemployment front, with its projected rate steadily on a downward trend from 3.5 per cent in 2016, to 3.4 per cent in 2017 and 3.2 per cent in 2018,” he said in his commentary on the 2018 Budget.