THE 2018 Budget, to be unveiled on Oct 27, will be a deft balancing act between keeping a broad-based sustained economic growth and meeting public expectations for a more generous package.
With an eye on the general election, this budget will definitely address short-term concerns for some segments of the economy while keeping focus on the medium-term economic transformation.
Prime Minister and Finance Minister Datuk Seri Najib Razak will hand out some goodies for average Malaysians — from the poor to the middle-class, government servants and blue-collar workers.
This budget is about creating a “feel-good” factor ahead of the 14th General Election, now widely expected to be held in the first quarter of next year.
There will be a slew of measures to help the people cope with the higher cost of living. There will be more incentives for training and retraining to help workers raise their income and unemployed graduates get jobs.
More working people now worry about their take-home salary, as costs are rising much faster than wages. If you are single and living in KL, you need at least RM2,700 per month to survive. Many turn to a second job to earn an extra income.
More ominously, a recent Bank Negara survey showed more than 75 per cent of Malaysians find it difficult to even raise RM1,000 to meet emergency needs.
The central bank’s survey also showed that a mere six per cent of salaried Malaysians are able to sustain themselves for more than six months if they lose their jobs, the main source of their income.
While the social spending focus is mainly on the poor and low-income earners, the middle-class (the so-called M40) is also not spared from the impact of higher living costs as their income remains stagnant.
The income stagnation is one of the anxieties of the middle-class, not only in Malaysia but also in developed countries.
While Malaysians enjoy a higher standard of living, their income has not grown as much as the costs. This is due to the slowdown in productivity growth and weakened bargaining power of the workers.
The uneven pace of technological change in the country, for that matter, in the world, has now created a new class divide — digital haves versus digital have-nots.
Workers in the innovation sector, such as fintech and computer software development, will probably earn more than those in the basic manufacturing industry.
The gulf between the leaders of innovation companies and the majority of firms in the country has been widening too.
Economists generally expect this budget to be slightly expansionary, with the government expenditure rising moderately due to higher revenue from slightly higher oil prices and higher tax collection. Brent crude prices are hovering at around US$56.62 per barrel, up by about 10 per cent from a year ago.
Despite the higher government spending, the budget will remain prudent, keeping the fiscal consolidation on track.
The budget deficit will decline slightly to 2.9 per cent of the GDP for 2018, from 3.0 per cent in 2017.
The government will also speed up spending on major infrastructure projects to spur economic growth. The projects include the East Coast Rail Link, the Gemas-Johor Baru double-tracking project, the Malaysia Vision Valley and the Pan-Borneo Highway.
Unpopular measures, such as toll hikes, higher levy on foreign workers and the proposed inheritance tax, will not be introduced.
Looking beyond the short-term measures, the 2018 Budget will keep a firm eye on Malaysia’s economic transformation and TN50.
This means more incentives and measures to support initiatives on technology and innovation, including the digital industry, and preparing students and workers to boost their skills.
More investments in quality education are a must if Malaysia were to be a serious player in the Digital Age.
A Jalil Hamid feels in a digital world, the winner does not always take all