Economists positive on Malaysian government expansionary budget

Source: Xinhua| 2019-10-14 16:29:40|Editor: xuxin
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KUALA LUMPUR, Oct. 14 (Xinhua) -- Economists said Monday that they expect Malaysian government's recent expansionary budget to remain supportive of the country's economy.

Public Investment Bank Research said in its report that it sees the Budget 2020 as growth-centric with sufficient measures to impact the economy positively, enhanced job creation and structural reform, while at the same time not harming the government's commitment to restoring fiscal health in the medium term.

"While consumers are seemingly lacking confidence and businesses appearing reluctant in committing to investment decisions, the government has stepped in with a slightly expansionary budget," said the research house, adding that the budget appears to be balanced, with no punitive measures on corporates announced.

Hong Leong Investment Bank Research also applauded the budget as there were more income boosters and initiatives to attract foreign direct investments and domestic investments.

The research house opined that the government's fiscal deficit target of -3.2 percent of gross domestic product (GDP) next year is achievable, as government managed the pace of spending, consistent with the needs and pace of the domestic economy.

Affin Hwang Capital also highlighted that the recent budget will remain supportive of the country's domestic demand, especially with numerous expenditure measures that will bolster private consumption and investment.

"Responsibility and prudence seem to be the order of the day with the focus tilted very much towards pump-priming consumption spending," said the research house.

RHB Research Institute also deemed the budget a relatively market-friendly budget that was broadly in line with its expectations and free of unpleasant surprises.

"It was a people-centric budget that contained multiple proposals to address issues affecting the B40 (low income group) segment, in addition to initiatives to pump-prime the economy via the construction sector," said the research house, adding that it is also encouraged by wide-ranging proposals to kick-start labour reform.

Meanwhile, CIMB-CGS Research sees the budget is regaining balance after sharp fiscal policy adjustments, and the "slightly expansionary" strategy is anticipated to counter meaningful downside risks to Malaysia's economy from external headwinds.

Although the research house think the official GDP growth target of 4.8 percent in 2020 leans on the optimistic side, it believed the prudent budget deficit of 3.2 percent of GDP and conservative oil price assumption of 62 U.S. dollars per barrel would provide sufficient fiscal headroom for Malaysia to further intervention should economic momentum falter next year.

Amid global trade tensions, financial market volatility and geopolitical risks, MIDF research is positive that the budget would assist in stimulating Malaysian domestic economy with various measures introduced.

"The mildly expansionary budget amid the general slowdown in world's economy is an attestation of the Malaysian government's commitment towards its long-term fiscal goal," it said.

Malaysia's Finance Ministry announced last Friday that the country's economy is expected to grow at 4.7 percent and 4.8 percent in 2019 and 2020, respectively amid external headwinds.

The ministry also projected its fiscal deficit to be slightly higher at 3.2 percent (from original target of 3 percent) of its GDP next year, as the government needs to sustain spending to spur the economy.