Budget 2017 is expected to be an expansionary one focusing on boosting the purchasing power of the people and private investments.

Malaysian Institute of Economic Research (MIER) executive director Zakariah Abdul Rashid said more incentives would be required in view of the sluggish external economic environment.

"It is likely to address the issues of the people as the government strives to balance its financial position," he said at MIER's economic briefing in Kuala Lumpur today.

He said the government was not likely to cut the Goods and Services Tax as its revenue was constrained by lower crude oil prices.

The declining current account due to outflow of money abroad from the repatriation of earnings by foreign workers and moderation in exports with subdued global economic growth, he said, were also another concern in government's finances.

In this respect, Zakariah said there was a need for provisions in Budget 2017 to boost Malaysian exports.

Zakariah said with trade and global economic growth slowdown, heightened uncertainty in major economies in China and the US presidential election, there was a need to boost consumer spending and private investments.

"Malaysia is a trading nation and affected by the global slowdown."

He said tax relief should be given to boost disposable income.

"The high household debt, which stands at about 90 per cent of the gross domestic product, is not an easy task to curb. The solution is by increasing the disposable income," he said.

For this reason, Zakariah said, cash distribution to the lower income group could help to mitigate concerns of rising cost of living even if this is a short-term measure.

"However, in the longer term the more effective way is to provide incentives for the lower income group to be able to contribute to the economy," he said.

Zakariah said despite the difficult and challenging economic environment due to sluggish global economic arena, Malaysia's positive trade surplus has managed to cushion the downside risks.

He also praised efforts made by the International Trade and Industry Ministry and Malaysian Investment Development Authority in boosting foreign investment into Malaysia to attract trade and investment.

"The US, Singapore, China, Japan and European Union have been the major trade partners for Malaysia with the substantial portion of our trade from the electrical and electronics sector."

- Bernama