KUALA LUMPUR: Malaysian Prime Minister Najib Razak on Friday announced billions of ringgit in cash and grants to assist lower-income citizens and young people as he introduced a budget that hints at the prospect of early elections.
The government will give special bonuses and cheaper housing to civil servants, offer discounts on the repayment of student loans and provide tax relief on smartphones and tablets, Najib said in his annual budget speech on Friday.
He pledged to keep the budget deficit under control in the face of global risks and low oil prices, while relying on key infrastructure projects and cash handouts to help underpin growth in the economy.
After weathering more than a year of political turmoil and financial scandals, Najib must tackle a slowing economy while keeping voters happy ahead of a possible early general election that may come as soon as March. The premier is under pressure to find ways to sustain growth while gradually closing the budget gap after a collapse in crude prices slashed revenue in the oil-producing country.
“Budget 2017 that was announced is best characterised as a ‘feel-good’ election budget and raises the odds of early elections that are not due until May 2018,” said Weiwen Ng, an economist at ANZ Banking Group in Singapore. "It remains a fine balancing act to maintain fiscal prudence and growth, with oil as the wild card."
The government estimates gross domestic product will expand between 4% and 5% in 2017, from a range of 4% to 4.5% this year, the Ministry of Finance said in its 2016-17 economic report released on Friday. The fiscal shortfall is forecast to narrow to 3% of GDP next year, from 3.1% in 2016. Najib reiterated a commitment to achieve a near-balanced budget by the end of the decade.
The premier announced income tax cuts for small and medium-sized companies, and announced allocations to mitigate floods, build and maintain roads in rural areas and to boost food production. For the 1.6 million-strong civil service, he said they will get bigger housing and motorcycle loans and access to homes at below-market prices.
Najib also increased some stamp-duty exemptions for first-home buyers as he eased financing rules for the government’s affordable housing programme.
Opposition lawmakers walked out during Najib’s delivery after holding up placards that made reference to "Malaysian Official 1", a description by the US Department of Justice of a politician who controlled accounts that received hundreds of millions of dollars in funds looted from the state investment fund 1Malaysia Development Bhd (1MDB), which Najib chaired.
One of the key targets of the US investigation is the high-living financier Jho Low, a close friend of Najib's stepson. The latter has dabbled in movies and some of the money used to produce The Wolf of Wall Street, starring Leonardo DiCaprio, is alleged to have come from 1MDB.
The premier previously acknowledged funds went into his accounts before the 2013 election but maintains the money was a donation from the Saudi royal family and most was later returned.
The populist budget is a diversionary tactic, opposition lawmakers said.
"This is an attempt to buy votes and the hearts of the people ahead of the elections," said Nurul Izzah Anwar, a lawmaker with the opposition People’s Justice Party. "We want to give a message that when corruption, abuse of power, is not addressed by the government, then what we have are just temporary election sweeteners."
Najib’s administration is counting on ongoing projects to draw private investment, including the 1,796-kilometre highway linking the Borneo states of Sabah and Sarawak, a new Petronas refinery in Johor and subway construction in the capital. Cash transfers to low-income earners and lower contributions by workers to the national pension fund will support consumer spending, the Finance Ministry said.
"The government is aware of the rumours of so-called deteriorating investors’ confidence in the Malaysian economy," Najib said. "A nation’s economy is highly related to perception, as without confidence there will be no investment to drive the economy."