Expectations of Budget 2018 Revealed

With the 14th General Election is widely expected to be called in early 2018, most would anticipate the Budget 2018 to be a pre-election budget. It has been expected that the Budget 2018 will mainly focus on people-centric measures, including special initiatives to raise disposable income as a way to alleviate the rising cost of living.

During this budget, the Government is expected to pave the way for the future of the Malaysian economy under the new Transformasi Nasional (TN50) plan, which would likely put an emphasis on the digital economy and the use of technology to advance economic growth.

In the first half of 2017, the Malaysian economy grew at a robust pace of 5.7%, supported mainly by growth in private consumption and external demand. Despite several indicators to suggest steady private consumption growth, it is imperative that the government continues to implement policies that bolster domestic demand in order to sustain the nascent recovery in consumer sentiment.

The Bantuan Rakyat 1Malaysia (BR1M) will likely continue, with a higher allocation of RM1,300 per household (for households earning RM3,900 and below). As part of the transformation plan, the government could introduce new initiatives such as a Graduate Employment Scheme and Transit Home program via rent to own schemes to alleviate the financial burden on fresh graduates due to rising cost of living.

On the fiscal side, the government will continue to exercise prudence in spending and diversify the sources of revenue, reducing further dependence on oil revenue (13.5% of total revenue in 2016). This year the focus will be on GST collection (19.4% of total revenue in 2016) and corporate income tax (27.4% of total revenue).

Overall, efforts to reduce the country’s fiscal deficit to 3.0% of GDP this year will still continue, with expectations of GDP in 2018 to reach 2.8% due to stronger GDP growth during 2017 – 2018. This brings the forecast for 2018 GDP to reach 5.0% and upgrade the 2017 GDP to 5.4% (from 5.2%), due to the improved conditions both domestically and externally.

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