The
2012 Budget, to be tabled in Parliament today, will likely contain measures to
increase dispo-sable income or take-home pay to help Malaysians keep pace with
the rise in living costs, says Bank Islam chief economist.
Azrul Azwar Ahmad Tajudin said other
strategies should revolve around commitment to a balanced budget in the medium
to long term, initiatives to lighten the burden of rising living costs and a
conducive environment for private sector (foreign and domestic) businesses to
operate.
He also expects it to feature some
pump-priming measures with huge multiplier effects to help soften the blow from
a pullback in global demand.
Despite limited fiscal cushions, the 2012
Budget is widely expected to be an “election” or even a “break-the-bank” budget
in the run-up to the 13th General Election with many “populist” goodies.
Although Malaysia does not suffer from the
fiscal malaise as bad as in the Western world, with a budget deficit-to-GDP
ratio of 5.6 per cent and public debt-to-GDP ratio of 53.1 per cent in 2010,
the scope for a highly expansionary budget is rather constrained, he said.
Azrul added that the government is expected to
reduce operating expenditure (opex), which made up almost 55 per cent of the
total in 2010.
The opex consists of emolument (30.8 per
cent), pensions and gratuities (7.6 per cent) and supplies and services (15.7
per cent).
Meanwhile, Bank of America Merrill Lynch said
the 2012 Budget needs to boost investor confidence and sustain growth in the
face of a difficult global economic environment.
“The Economic Transformation Programme will
have to be seen as being right on track, and not backtracking,” its economist
Dr Chua Hak Bin said.
Prime Minister Datuk Seri Najib Razak will
have to deliver a budget that will win back voter support and help ease the
rising cost of living, and delivering these objectives will be a tall order, he
added.
“The government will likely introduce
pro-investment measures to support growth, given global recession risks, and
measures to ease the people’s burden.”
He also expects corporate tax and individual
income tax rates to remain at 25 and 26 per cent respectively.
“Such income tax cuts will likely occur only
when the government is prepared to implement the Goods and Services Tax and
this will likely occur only after the elections, possibly in 2013 or 2014.”
A hike in the real property gains tax from the
current 5 per cent to 30 per cent is likely, The government may however extend
the current 10 per cent withholding tax for real estate investment trusts for a
few more years.
Chua also said that initiatives to address the
cost of living could include cash vouchers or transfers for lower-income
families, additional half-month bonuses for civil servants and a minimum-wage
policy from 2012.
He also expects the government to hike excise
duties on tobacco and alcohol, although gaming duties are likely to remain
unchanged to support tourism growth in facing greater regional competition.
BTimes
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