The 2008 Budget to be unveiled later today is expected to hand out goodies including tax cuts as the government tries to spur econonic growth and win voter support ahead of national elections.

Economic observers said the administration of Prime Minister Abdullah Ahmad Badawi will attempt to fuel economic expansion amid growing concern over the US economy.

"The people can expect everything," Abdullah, who is also the finance minister, was quoted as saying by the New Straits Times newspaper today.

The premier is expected to call elections early next year, well ahead of a 2009 deadline.

Local newspapers splashed front pages with banner headlines including: 'Homes for all', 'More Money' and 'Friendly Budget'.

Analysts said they expected the government to cut personal and corporate tax, serving a dual purpose by spurring consumption and also cheering voters who have become disgruntled over rising costs and stagnant wages.

"This is one sure way to appease voters and there is speculation that some measures are due to streamline the personal and corporate income tax rates," the Sun newspaper said.

Wan Suhaimi Saidie, an economist with Kenanga Investment Bank, told AFP that "one sure way to win the hearts and minds of the people is to cut taxes."

Cut in income tax

Observers said the government is likely to cut personal income tax by up to two percentage points over the next two years, reducing it to 26 percent - in line with previously announced reductions in the corporate tax rate.

The budget, to be unveiled at 4pm, is also aimed at boosting Malaysia's competitiveness against rising regional economies like China, India, Thailand and Vietnam.

Malaysia is aiming for 6.0 percent growth this year, after its economy expanded by 5.9 percent in 2006.

But analysts said the government must introduce measures to bolster domestic demand given flagging exports and the increased risk of a US slowdown due to the subprime lending crisis.

Malaysia, Southeast Asia's third-largest economy, has seen foreign direct investment steadily declining in recent years.

In 2006 it amounted to an estimated US$3.9 billion dollars, compared to US$5.5 billion dollars in 2001.

Malaysia has already embarked on multi-million-dollar development plans to spread growth and jobs to its Malay-majority hinterlands, which is a traditional source of votes for Abdullah's ruling party.

Malaysiakini will provide live reports beginning 4pm today.