Govt needs to strike a balance for Budget 2018, analysts say

According to Asli, prudent spending and keeping the fiscal deficit within target will be a challenge


The government must continue to focus on the country’s long-term financial soundness and economic needs for the upcoming Budget 2018 to prevent excessive and unnecessary spending.

The 2018 budget, which will be tabled at the end of the month, is speculated to be filled with election goodies as this is the last budget to be tabled before the general election, which must be held before August 2018.

Asian Strategy and Leadership Institute (Asli) director Tan Sri Dr Ramon Navaratnam said although the public’s views should be reflected in the budget, the government can’t afford to give “too much” away in order to keep the fiscal deficit in check.

“They have to be more tactful. While on the lower income side, the Goods and Services

Tax should have a bigger lift on exemptions, especially for basic needs, it has to be compensated through other channels such as taxing individuals with excessive wealth,” Ramon told The Malaysian Reserve.

Prudent spending and keeping the fiscal deficit within target will be a challenge, he said.

“That is one way to keep the fiscal deficit under control. The other way is to cut back on capital expenditure, but that will not be good for the country,” he said.

According to Sunway University Business School economics Prof Dr Yeah Kim Leng, given that it will be an election budget, the government is expected to maximise its spending through salary increases and tax incentives.

“There will likely be greater expenditure or increased allocation for the bottom 40 and middle 40 income groups working in both the public and private sectors.

“This could come in the form of a reasonable increase in salary. Maybe half a month or a month’s bonus,” Yeah said.

However, he said the higher wages would elevate the cost of doing business.

“That will be the main concern. The government will have to be mindful, especially for small and medium enterprises, where if wages were to rise too quickly, there will be an impact on cost of doing business,” Yeah said.

He said the government could strike a balance in Budget 2018 by offering technological upgrades to enhance the growth potential of industries as the country move towards Industry 4.0.

“The government can achieve a balance in terms of realising its immediate term objective of a favourable budget, but also sustaining the competitiveness and meeting the needs of sectors for them to compete in the new world of e-commerce,” Yeah said.

Finance Minister Datuk Seri Mohd Najib Razak will table the budget on Oct 27 at the Dewan Rakyat.