KUALA LUMPUR: The all-encapsulating 2018 Budget could be made to look conservative should crude oil prices continue to rise, a sign that the economy is set to recover over the coming three years.
Minister in the Prime Minister's Department Datuk Seri Abdul Rahman Dahlan said the rise has already been predicted by analysts while the Organisation of Petroleum Exporting Countries (OPEC) has stated their confidence of a rise to US$70 (RM297) in 2018 from US$55 (RM233) per barrel currently, which would be a positive sign for the ringgit.
Speaking on the Bicara Bajet 2018 programme, a collaboration between the New Straits Times, Berita Harian and Harian Metro, aired live on NST Online's Facebook page today, Rahman said the confidence is justified by the drop in supply of crude oil due to lack of exploration worldwide since 2014.
“When the price dropped, oil and gas companies naturally did not see it as viable to continue exploration and thus there were very few new oil fields discovered over the past three years. This meant a declining supply and thus eventually the lack of supply would drive the price up,” said Rahman.
He said when crude oil prices crashed from over US$100 (RM420) per barrel to below US$40 (RM169) in 2014, it resulted in an annual revenue loss of over RM42 billion for Malaysia, which inevitably impacted the economy, as did the ringgit against the US dollar.
“I have been speaking to officials from OPEC and non-OPEC nations and they are all bullish about this," said Rahman, adding that he had always appreciated Prime Minister Datuk Seri Najib Razak's economic vision in budget planning.
“The only thing is, Najib was unfortunate to have been faced with the huge drop in oil prices in 2014,” he said.
He said the 2018 Budget, with an allocation of RM20 million more than that of 2017, was a comprehensive budget that touched upon all facets of society and should be also seen as a mode by which the people gain a part of the nation's wealth.
“At the same time there are many forms of aid for the people in the form of income tax revisions and the abolishment of four toll gates, while also managing to reduce our fiscal deficit. The prime minister has been very disciplined in expenditure,” said Rahman.
On the much-debated Goods and Services Tax (GST), Rahman said it was irresponsible of the opposition to state that its abolishment would be more beneficial.
“Nobody likes taxes, but over 200 countries have implemented the GST. If you look at the bigger picture, oil prices had fallen from US$100 to US$40 in a very short period of time, which impacted the economy hard. It took more than RM42 billion out of our budget.
“We needed to sustain growth and development, thus GST ensured stability. Of course it requires time to adjust and it will take two to three years for things to stabilise. GST itself provides a stable revenue stream because it is a consumption tax, thus even in bad times it is stable.
“I must say that GST is here to stay because it provides us stability and enables the government to continue to provide things such as subsidies and aid to the people such as BR1M. To return to the ineffective implementation of the sales and services tax (SST) is impossible.
“In suggesting that (abolishing the GST), the opposition have shown that they have no clue on how to run the economy and are just politicising the need to abolish GST, which can be dangerous.”
On claims that the 2018 Budget 2018 leans towards civil servants, Rahman said this was again not based on facts.
“We focused strongly on affordable homes for everybody. Peoples' Housing Projects (PPR) are not homes for civil servants, but for everybody. These are subsidised from a cost of RM130,000 per unit and sold at RM35,000, which should be seen as a means of sharing the nation's wealth with the people,” said Rahman.
He said the enforcement of the industrialised building system (IBS) by 2019 would also ensure more cost controls, which would eventually make homes more afforda
ble, while the aggressive drive in public transport infrastructure projects such as the MRT, ERL, HSR, ECRL and the Pan Borneo Highway were further examples of benefits for all.
"We have driven the focus on digital economy, which provides a means by which people can trade and maximise their talents, especially emphasising on youth,” he said.
“We've also raised awareness on the need for strong financial management skills among the youth in order to prevent them from being trapped by debt due to poor finance management. Being indebted at an early age stops them from being productive.”
New models to revitalise the capital market, in particular the development of an alternative trading platform (ATP) subject to approval by the Securities Commission (SC) would also further stimulate the economy.
“In short, this is a budget that touches all facets of life like never before,” said Rahman.