Malaysia presents populist budget targeting voters ahead of polls

By Joseph Sipalan

KUALA LUMPUR (Reuters) – Malaysian Prime Minister Najib Razak announced a populist budget on Friday that targets his party’s traditional vote base, as he looks to shore up dented support ahead of a tough election that must be held by August.

Najib, whose term ends in June, is under pressure to win over voters upset with rising soaring costs and a corruption scandal at state fund 1Malaysia Development Berhad (1MDB).

“I stand here today… to bring happy news that will put a smile on everyone’s faces,” Najib said at the start of his budget speech to parliament.

Malaysia’s higher economic growth and revenue this year, aided by higher oil prices, allows Najib to propose higher spending ahead of elections, but at the same time project a lower fiscal deficit in 2018 than for this year.

The government will spend a total of 280.25 billion ringgit ($66.1 billion)in 2018, up 7.5 percent from this year’s anticipated expenditure of 260.8 billion ringgit.

Spending will include aid packages worth 6.5 billion ringgit for farmers, fisherman and rubber tappers, the largest allocation yet for the groups who are among key voters for Najib’s ruling Barisan Nasional (BN) coalition.

Najib also located 6.5 billion ringgit for rural infrastructure development, and waived tolls from key highways in several cities. Big allocations were also made for road projects and schools.

The prime minister announced an allocation of 6.8 billion ringgit, same as the previous year, for an annual cash handouts program. He allocated 3.9 billion ringgit for goods and transport subsidies and set aside 2.2 billion ringgit to help home ownership under various program.

Income tax will be cut by 2 percentage points for Malaysians those earning 20,000–70,000 ringgit a year.

Najib was widely expected to present a populist budget to try to boost support for his party as a time former Prime Minister Mahathir Mohanad, who has quit the party, leads a vigorous effort to remove the leader.

Najib has also been dogged by a multi-billion dollar scandal tied to state fund 1Malaysia Development Berhad (1MDB), a fund that he helped set up. He has denied any wrongdoing.

GROWTH REBOUNDS

Southeast Asia’s third-largest economy expects full-year growth at 5.2-5.7 percent this year, rebounding strongly from 4.2 percent in 2016.

Growth is seen at 5.0-5.5 percent next year.

Despite increased spending, the fiscal deficit is seen narrowing to 2.8 percent of gross domestic product in 2018 from 3.0 percent this year. [L4N1N11RT]

Najib said his administration remains committed to narrowing the fiscal deficit, saying “What is important is government maintain fiscal consolidation target.”

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