KUALA LUMPUR, Aug 21 — The increase in government spending ahead of the 14^th general elections (GE14) may boost Malaysia’s economy in the next quarters, analysts BMI Research said in a report today.

Despite that, this pre-election spending is unlikely to affect Putrajaya’s ongoing plan to reduce its fiscal deficit to this year’s target of 3 per cent of the gross domestic product (GDP), it said.

"We expect government spending to increase in the run up to parliamentary elections that must be held by August 2018 as Barisan Nasional seeks to retain its key support bases ahead of what is shaping up to be an increasingly competitive election.

"This is likely to provide a boost to headline growth figures over the coming quarters,” the report said.

The Fitch Group company said higher oil prices will give Putrajaya some room to increase its spending despite the fiscal consolidation target, since oil-related income makes up around 20 per cent of its revenues.

"The government has announced a series of measures aimed at shoring up support among its various voter bases and we believe it that this could ramp up as elections draw nearer,” it said.

The report also said that an increase in financial aid towards the public would slightly increase domestic demand.

Despite that, Malaysia’s growth may be hampered by a sharp slowdown in the economy of China, among the country’s largest trade partner, thus affecting its export sector.

"A considerable rise in political risks in the run up to the election could also undermine existing confidence in Malaysia’s business environment and weigh on investment,” BMI said.

This comes as Malaysia announced last week that its economy expanded 5.8 per cent in the second quarter from a year earlier, the fastest pace in more than two years and defying expectations for a slight slowdown.