The government of Malaysia has revised down the country’s projected gross domestic product (GDP) growth in 2016 as it unveiled several restructuring measures and adjustments to the 2016 budget to cut operating and development expenditures by several billion ringgit.
Presenting the revised 2016 budget on January 28, Prime Minister Najib Tun Razak said the national economic growth outlook for 2016 has been reduced to between 4 and 4.5% from the previous target of 4% to 5%. This is to reflect the administration’s new assumption of Brent crude oil price of US$30 to $35 a barrel from the previous assumed crude oil price of US$48 a barrel.
With the budget re-calibration, the Prime Minister added that they expect to save MYR9 billion ($2 billion) in operating and development expenditures.
The government previously announced in October 2015 an allocation of MYR267.2 billion in Budget 2016, of which operating expenditure amounted to MYR215 billion while development expenditure amounted to MYR49 billion.
The government executive stressed that Malaysia was not facing a recession or a technical recession, according to a news report by Bernama.
In his presentation Najib said the deficit target of 3.1% for 2016 remained at 3.1% of GDP as announced previously. He said the national debt will continue to decrease and will not exceed the prudent level of 55% of GDP.
The national monetary policy will be accommodative, while interest rates are to be maintained at levels that support economic activities. This means the government will not impose capital control or peg the ringgit.
Other highlights of Najib’s budget speech included his statement that the government remains committed to achieving the targeted private investment totaling MYR215 billion this year.
Implementation of major projects such as MRT and LRT, Pan-Borneo Highway, Malaysian Vision Valley, Cyber City Centre, RAPID Pengerang, and High-Speed Rail will continue.
To penetrate international markets, the government will intensify the mid-tier and Go-Export programs, and to enhance the credit guarantee facility for trade, EXIM Bank will increase funds for financing by MYR500 million.
Meanwhile MYR6 billion is to be allocated to assist small and medium enterprises and start-ups. The Goods and Services Tax is to remain at the prevailing rate of 6%.
To provide financial relief to the workforce, the compulsory employee provident fund contribution of employees will be reduced by 3% from March 2016 to December 2017. Employers’ contribution will remain the same.
A special tax relief of MYR2,000 will be given to employees who earned no more than MYR8,000 per month in the 2015 assessment year, while government-linked companies are going to reduce the salary gap between top management and workers.
And there will be no visa needed for tourists from China from March 1 to December 31 for visits no longer than 15 days.
Photo: Azharsofii
