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Home  >>   Daily News  >>   Malaysia News  >>   Economy  >>   PM Najib to present a populist pre-election budget
NEWS UPDATES Asean Affairs    28 September  2012

PM Najib to present a populist pre-election budget

27-Sep-2012

Despite grappling with a high fiscal deficit, Malaysian Prime Minister Najib Razak is expected to present a pain-free budget tomorrow, with the general election looming.

Some have dubbed this Najib's "third pre-election budget" as Malaysia has been in election mode from the time he took office in April 2009, after bruising polls a year earlier.

But this time, it will really be his final budget before his mandate runs out in April next year.

Kit Wei Zheng, an economist from Singapore-based Citigroup, said that the government will look to deliver the "best political bang for the buck" by focusing on the 1.3 million-strong civil service, the agricultural sector and disadvantaged groups.

"We would not rule out further civil servant bonuses, further handouts for lower income/disadvantaged groups, and other incentives for rural settlers, although handouts may not be as large as in 2012," he wrote in a report this week.

Bank of America's Asean chief economist Chua Hak Bin also noted that the budget is likely to be "election-friendly" with generous handouts, given that the polls could be as early as November.

Deputy Prime Minister Muhyiddin Yassin has hinted as much, saying it will include a plan for housing costing 300,000 ringgit (US$97,400) and below.

Rocketing home prices have become an emotive issue for the middle class.

Najib is seeking to win back support for the ruling Barisan Nasional coalition, which suffered record losses in the 2008 general election, although it clung on to power.

Political analyst Ibrahim Suffian, from the independent Merdeka Centre, said direct handouts can be effective in winning support, as they were earlier this year when RM2 billion was distributed to almost four million households earning below 3,000 ringgit a month each.

A Merdeka Centre survey soon after that showed Najib's approval rating climbing to 69 per cent from 59 per cent six months before. The support was the highest, at 78 per cent, among households with incomes lower than 1,500 ringgit a month.

"However, when it comes to the second or third time, there could be diminishing returns as people have come to expect it."

He also noted that unless handouts were targeted at young adults, they may not reach what is likely to be the biggest voter bloc in the next election. More than half the 12.9 million voters are below 40, and about a quarter below 30.

However, Kit noted that the budget will have to walk a tightrope between populism and fiscal prudence. Earlier this year, rating agencies like Standard & Poor's, Moody's Investors Service and Fitch Ratings raised concerns about Malaysia's debt level.

Malaysia has run a fiscal deficit since 1997, with a 22-year high of 7 per cent in 2009. Najib has pledged to reduce it to 3 per cent by 2015, with this year's target at 4.7 per cent.

A long-planned goods and services tax is unlikely to be in this budget, but CIMB Investment Bank's gaming analyst Lucius Chong said that the government may raise gaming taxes to boost its revenue.


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AseanAffairs   04 January 2011
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It is commonplace in journalism to write two types of articles at the transition point between the year that has passed and the New Year. As this writer qualifies as an “old hand” in observing Thailand with a track record dating back 14 years, it is time take a shot at what may unfold in Thailand in 2011.

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