Budget aims to spur growth, win votes

The prime minister is expected to expand stimulus measures in his last budge before the 13th general election.

(AFP) – Prime Minister Najib Tun Razak is expected to unveil a fresh round of handouts today in a voter-friendly budget aimed at shoring up support ahead of what is predicted to be a tough election.

Najib’s Barisan Nasional coalition, which has ruled the country for 55 years, must face a national ballot by June.

He has previously raised civil servants’ pay, handed cash to low-income households and announced rail and road projects to fuel growth, and analysts predict a repeat of such moves and other incentives to cushion rising prices.

Najib is also expected to expand stimulus measures to support the economy in his last budget before polls, where he will face a tough test against Anwar Ibrahim, who leads the three-party opposition Pakatan Rakyat alliance.

Ibrahim Suffian, director of Merdeka Center, Malaysia’s top polling organisation, told AFP that the issue of reducing public debt was not Najib’s immediate concern.

“It will be an election budget since the survival of his government is paramount as compared to tackling the budget deficit and public debt,” he said.

Ibrahim said Najib was again expected to offer cash handouts to the poor and pensioners, bonuses for civil servants and tax adjustments for the middle class.

“With the goodies, the government hopes it will be more attractive to the electorate,” he said.

Malaysia’s budget deficit stood at 4.7% in the first half of the year, while its public debt was 53% of gross domestic product in 2011.

Rating agencies Standard & Poor’s and Fitch recently warned of rising fiscal pressures in Malaysia that could lead to a downgrade.

But the government has said it is on target to reduce the deficit to 3.0% by 2015.

Yeah Kim Leng, chief economist with RAM Holdings, said handouts would be welcomed.

“As long as there is no deterioration in the deficit and debt levels, it would be welcomed given that the weak global economy requires most governments to prop up their domestic economy,” he said.

The prime minister will announce the budget to Parliament at 4pm.

A once-insignificant opposition scored unprecedented gains in 2008 general election that saw the long-ruling coalition, which Najib took over in 2009, lose its customary two-thirds parliamentary majority.

About 70% of the country’s 29 million population are low- and middle-income earners and have been hard hit by rising prices, especially for food and transport.

Bank Negara has previously forecast full-year growth between 4% and 5% this year, slower than the 5.1% seen in 2011.