KUALA LUMPUR, Oct 21 — With the next general elections due in the next two years, Opposition politicians have expressed concern that Putrajaya will continue to provide financial assistance that appeal to the people despite the strain on the Treasury.
Economists share the same view; forecasting not only the continuance of the popular 1 Malaysia People’s Aid (BR1M) in 2017, but at a higher quantum. But they also predict more cuts in subsidies and spending in order to sustain such handouts.
"The most direct one is increment in BR1M, so we expect increment in the payment in terms of quantum and the extended to those earning below RM5,000 per month,” DAP’s national organising secretary Anthony Loke told Malay Mail Online recently.
"I don’t think they can afford to do more because of the shrinking revenue of the government, even Goods and Services Tax (GST) collection is not up to collection, consumerism is low. Economy not going anywhere and purchasing power is reduced that has affected the business sector,” the Seremban MP added.
PKR’s Kelana Jaya MP Wong Chen agreed, saying that BR1M has been an expected announcement from Putrajaya, but then claiming the public won’t have much to be happy with it.
"Nothing much for people to celebrate since they have already cut for healthcare and education,” said Wong, who heads the trade and investment bureau in his party.
"So while they may receive bit more for BR1M, they are gonna be facing more cuts so it’s going to be worse off. As it is the government has already cut scholarships and funding for universities.”
Currently, households earning less than RM3,000 per month are eligible for a one-off handout of RM1,000, while those earning less than RM4,000 are eligible for RM800.
Single adults above 21 years old and earning under RM2,000, can receive RM400.
Ruling coalition Barisan Nasional (BN) had vowed in its 2013 election manifesto that it aims to increase the quantum to RM1,200 for households, and RM500 for singles by 2018.
Not an ‘election budget’, but one on ‘commitment’
Senior economist Datuk Latifah Merican Cheong had in a recent Budget 2017 forum expressed her worry that the Budget would likely be influenced by considerations such as the timing of the next general election.
"Our fiscal discipline is being marred by decisions more skewed towards political convenience rather than based strictly on economic considerations,” said the former Bank Negara Malaysia assistant governor.
But an economist and author who refused to be named played down the possibility that Budget 2017 will be an "election budget”, despite the focus on populist measures.
"Budget will be people-friendly, not because of election but that’s what’s outlined in the 11th Malaysian Plan. Look at this year’s budget theme and you’ll get an idea what the key focus will be,” he told Malay Mail Online.
Prime Minister Datuk Seri Najib Razak announced yesterday that he would reveal a "commitment budget”, where short-term political gain takes a back seat.
”This is a commitment Budget. Others may put short-term political gain first, but this government will not,” Najib said in a statement.
”We commit to ensuring that the economic fundamentals of the nation remain resilient and strong — including policy on deficit targets, spurred economic activity, and the long-term health of the financial system.”
"We commit to being prudent and creative in optimising expenditure, to ensure delivery for the people.
”And we commit to a comprehensive, inclusive Budget that will fulfil our promises to the people,” he added.
Where would the money come from?
"Despite all the encouragement to spend, consumer sentiment is also down, export is also down,” said Dr Dzulkefly Ahmad, the strategic director of Parti Amanah Negara.
"I don’t want to sound like an alarmist, but the fact remains that the government doesn’t have the money they used to have when they did their other populist budgets when they were spending in good and bad times. Now we don’t have the fiscal space anymore.”
Economists concurred with this assessment.
"The biggest problem Putrajaya is facing is fall of revenue. Whatever it is, to achieve their fiscal target, balanced budget would be hard,” Izzudin Yusof, an economist with an investment bank, told Malay Mail Online at a forum on Budget 2017 recently.
Despite that, HSBC Ltd economist Lim Su Sian in a Budget 2017 preview note released this week said Malaysia’s revenue will likely be taken later this year from state oil giant Petronas’ dividend payment.
Furthermore, oil prices have risen to US$43.5 per barrel so far, much higher than Putrajaya’s assumption of as low as US$30 per barrel in Budget 2016, Lim said.
Despite that, Lim said Malaysia is not "out of the woods” on its finances, as overall revenue drop of 5.6 per cent year-on-year is still the biggest on record since 2001, while GST collection is dismal — collection in second quarter of 2016 fell 6.5 per cent compared to the same period in 2015.
"Those looking for an all-out ‘election budget’ may be disappointed,” Lim said.
"So they are going to borrow more from KWSP and KWAP. They are going to borrow more from our internal savings,” Wong predicted, using the Malay abbreviations for state-owned fund managers Employees’ Provident Fund and Retirement Fund Inc.
Already, news portal The Star Online reported early yesterday that subsidies for all cooking oil packages other than 1kg bag and 5kg bottles will be removed on November 1. The latter subsidy will also be dropped on January 1.
But later yesterday, Second Finance Minister Datuk Johari Abdul Ghani told reporters in Parliament that the government will continue the cooking oil subsidy domestically.
"The people will not be affected and will continue to be subsidised,” he was quoted as saying by national news agency Bernama, when asked about the report citing Malayan Edible Oil Manufacturers Association.
"The cooking oil subsidy given by the government is used for export sale. This is what we want to control,” he added.
RHB Bank was also reported by Reuters as expecting other subsidies for daily necessities such as flour and cooking gas to be cut, although in a gradual and moderate pace.
Prime Minister Najib will present Budget 2017 in Parliament this afternoon, as the government aims to achieve a balanced budget by 2020.
Malaysia’s economic growth this year is forecast to be at between 4 to 4.5 per cent, while fiscal deficit is predicted to drop to 3.1 per cent of gross domestic product compared to 3.2 per cent last year.
The PM said the budget today will among others seek to raise the public’s disposable income of the rakyat; mitigate the rising cost of living; provide more affordable houses; provide substantial measures on education; and allocations for the provision of quality healthcare services.
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