Reuters logo
UPDATE 1-Malaysia hands out goodies in 2012 budget, polls in view
October 7, 2011 / 10:47 AM / 6 years ago

UPDATE 1-Malaysia hands out goodies in 2012 budget, polls in view

* Budget offers help for poor ahead of expected 2012 election

* Infrastructure spending to be increased to spur domestic demand

* Subsidy bill modestly lower

* 2011 GDP growth estimate trimmed to 5.0-5.5 percent (Recasts with budget measures, adds comments)

By Razak Ahmad and Min Hun Fong

KUALA LUMPUR, Oct 7 (Reuters) - Malaysia said on Friday it planned to boost infrastructure and consumer spending to cushion the impact of the global economic downturn and bolster confidence in the run-up to an expected general election in early 2012.

Prime Minister Najib Razak also handed out cash payments to the poor, raised civil servants’ pay and opened up 17 service subsectors to foreign investors, with domestic demand targeted to be the key driver of the economy as a possible global recession clouds the outlook.

“Global developments would certainly have a direct impact on the Malaysian economy,” Najib, who is also Finance Minister, said as he presented the 2012 budget in parliament.

“With these developments the government will put in place measures to stimulate domestic economic activities, in particular public and private investments.”

The government also allocated 2 billion ringgit of infrastructure projects for bumiputras, most of whom are ethnic Malays. It offered tax breaks for Islamic bond issuance, raised civil servant pensions and announced that it would list the global arm of its plantation group FELDA.

Najib forecast that the economy would grow 5-6 percent in 2012, while the fiscal deficit would fall further on the strength of robust domestic demand and commodities exports.

Reflecting the downdraft on Asia from the slowdown in the United States and Europe, the government trimmed its 2011 economic growth target to 5.0-5.5 percent from 5.0-6.0 percent earlier.

Its fiscal deficit will shrink further to 4.7 percent of gross domestic product next year from 5.4 percent in 2011 as it reduces development spending, confirming an earlier Reuters report. [ID:

Analysts said the 2012 spending plan was tailored to woo voters, particularly the majority ethnic Malays whose support is split between Najib and the opposition.

“This a populist budget, he is trying to be popular with everyone, give goodies here and there so everyone won’t do too badly,” said James Chin, a political analyst at Monash University in Malaysia.

“What is surprising is the allocation to bumiputras. This was what Malay rights groups have been clamouring for but it’s a smaller allocation as they asked for 30 percent of the project. He is definitely trying to shore up ethnic Malay support.”

Najib is widely expected to call for a general election in early 2012, although one isn’t due until 2013, to prevent further political fallout from the weakening global economy.

The stock market ended 0.5 percent higher at 1,400.05 points while the budget was being announced. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

For the budget’s key measures see

For the 2011/2012 economic report, see

For analyst comments see ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^


Authorities also will maintain subsidies to keep prices down, while banking on low borrowing costs and a healthy job market to keep economic growth on an even keel next year.

But most economists thought the growth and deficit targets were too optimistic, given the weak global outlook.

“The last statement from (the central bank) Bank Negara was a bit more cautious, highlighting more the downside risks, whereas what I’ve seen so far in terms of the forecasts and the general statement, is the government still seems fairly upbeat,” said Hak Bin Chua, an economist with Bank of America Merrill Lynch.

“So there seems to be a slight disconnect... are these sort of targets or are these really realistic projections?”

Malaysia’s economic growth accelerated to a decade-high 7.2 percent in 2010, and is officially expected to be at least 5 percent this year, though annual growth moderated to 4.0 percent in the second quarter of 2011.

Last month, the Asian Development Bank said it had reduced its forecast for Malaysia’s 2011 GDP growth to 4.8 percent from 5.3 percent previously as global uncertainties grow, and trimmed its 2012 forecast to 5.1 percent from 5.3 percent.

The government said net domestic borrowings are expected to total 43.6 billion ringgit versus 45.1 billion ringgit in 2011.

Government revenue will be up 1.9 percent at 186.9 billion ringgit ($59 billion) in 2012 from a year ago, thanks to better tax earnings.

Subsidy spending on staples such as fuel, sugar and flour are expected to total 33.2 billion ringgit next year, versus 32.8 billion ringgit in 2011.

The government said inflation stood at 3.1 percent for the January-August period this year but did not give a forecast for 2012.

Domestic demand will expand 7.6 percent in 2012, versus 8.1 percent this year.

Exports, which accounted for about 89 percent of the Malaysian economy last year, are targeted to rise 6.0 percent next year, slowing slightly from the projected 6.7 percent this year. Import growth will moderate to 7.0 percent next year from 7.5 percent this year.

$1 = 3.179 Malaysian Ringgit Additional reporting by John Mair in Manila; Writing by Liau Y-Sing

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below