Malaysia pushing ‘feel good’ budget ahead of looming elections
- Malaysia is expected to deliver a slightly expansionary budget in a bid to boost voter support ahead of a general election that could be called any day
- Economists say Malaysia is likely to announce more cash handouts, but it may be limited by ballooning subsidies that are challenging fiscal discipline
Elections are not due until September 2023, but some factions of the ruling coalition have called for an early vote this year despite the year-end monsoon season and ensuing floods. Regardless of the timing, the budget to be presented on October 7 will be the last one before the next polls.
Economists say Malaysia is likely to announce more cash handouts and other goodies, though it may be limited by ballooning subsidies that are challenging fiscal discipline.
The government may also refrain from announcing any new major taxes – despite acknowledging the need for more revenue – due to the coming election, they said.
“There is high anticipation that the government will dish out more goodies than usual to create a ‘feel good’ effect as it will be its last budget before the 15th General Election,” CGS-CIMB analysts said in a research note last week. “Social support, including cash handouts, is likely to expand in depth and scope.”
RHB analyst Alexander Chia said the goodies will be “tempered by the lack of fiscal headroom.”
“We think no stone will be left unturned to ensure that the budget offers every assistance to the electorate at large, and to businesses to assist their recovery from the ravages of the pandemic,” Chia said.
However, given rising debts and subsidy bills, new revenue-raising initiatives and postponement of planned expenditures cannot be ruled out, he said.
State oil firm Petronas, a key source of revenue for Malaysia, is doubling its dividend to the government this year to 50 billion ringgit to support the government’s higher expenses.