KUALA LUMPUR: There are sprinkles of cheer in the 2020 Budget to lift Malaysia’s economy but they may not be enough to excite the local stock exchange in the immediate term, analysts said.
Key measures such as cash assistance for low-income group, higher minimum wages, tax breaks for the electronics sector and intellectual property, improving access to financing and special incentives to attract Fortune 500 companies would support robust outlook, they said.
United Overseas Bank (Malaysia) Bhd senior economist Julia Goh said with 2020 being the final year of the 11th Malaysia Plan (11MP), the 2020 Budget was crucial to ensure that gains made in previous years are sustained amid significant external headwinds.
“We are positive that the government announced a fair budget that prioritises the economy without much slippage in the fiscal deficit. The budget delivers a balance of measures to revitalise growth and investments, promote equality, create jobs, raise productivity and improve human capital,” Goh said.
Malaysia expects an uptick in real gross domestic product (GDP) growth to 4.8 per cent next year over 2019 estimate of 4.7 per cent.
This is above UOB Malaysia’s expectation of 4.4 per cent in 2020 and 4.6 per cent this year.
This, Goh said, would be driven by domestic demand amid resilient private sector spending and acceleration of projects towards the end of 11MP.
She added that although the targeted fiscal deficit of RM51.7 billion or 3.2 per cent of GDP in 2020 was higher than the initial three per cent target, it remains on a consolidation path.
“This is due to the government’s decision to allocate RM3.2 billion or 0.2 per cent of GDP as pre-emptive measures to support the economy amid stronger external headwinds. The government targets to lower the fiscal deficit to 2.8 per cent of GDP in the medium term,” she said.
Affin Hwang Capital said the budget 2020 may be deemed unexciting by market participants who had expected aggressive stimulative spending and tax cuts, amid increasing external headwinds.
“Responsibility and prudence seem to be the order of the day with the focus tilted very much towards pump-priming consumption spending,” it added.
The firm remains “neutral” on Bursa Malaysia’s benchmark FBM KLCI with an unchanged 2019 year-end target of 1,650 points based on 18 times 2019 earnings estimate.
“Ample domestic liquidity and FBM KLCI’s relative attractive dividend yields of 3.5 per cent should, however, provide downside support.”
MIDF Research said the mildly expansionary budget amid the general slowdown in world’s economy was proof of the government’s commitment towards its long-term fiscal goal.
“Therefore, we do not expect it to provide a sufficiently strong near-term impetus towards market sentiment which has been battered by external uncertainties particularly the ongoing spats between US and China.”
The firm revised its FBM KLCI’s year-end target to 1,630 points.