The doubling of fuel subsidies projected for this year due to the high world oil price is equivalent to one percent of the country's estimated 2011 gross domestic product (GDP).

NONE RAM Holdings Bhd group chief economist, Dr Yeah Kim Leng, said the government may be hard-pressed to meet the 5.2 percent fiscal deficit projected for this year.

"We expect the subsidy rationalisation for consumers to continue at a gradual pace.

"It is, however, likely to be soon given the six-month interval for price adjustment under the Performance Management and Delivery Unit-led rationalisation programme," he told Bernama.

He was commenting on Deputy Prime Minister Muhyiddin Yassin's statement on Monday after chairing the first meeting of the Cabinet Committee on Supplies and Prices that the government expected the value of subsidies this year to rise to RM20.58 billion from RM10.32 billion in 2010.  

Muhyiddin said of this amount, RM18 billion was just for petroleum products - RON95, diesel and liquid petroleum gas.

Government subsidies, especially for agricultural production, fisheries and the transport sector, were not expected to be rolled back, Yeah said.

Reduce waste

Yeah said there was, however, a need to enhance the effectiveness in the implementation process to reduce waste and leakage of the subsidies.

"Well-designed and targeted subsidies can help the government meet the twin socio-economic objectives of raising production while moderating the burden of rising prices on the low-income groups as well as dampening overall price pressures," he said.

Yeah said the key to the fight against cost-push inflation was not only to ensure adequate supplies but prevent artificial shortages that caused prices to escalate due to panic buying.

"Raising investment and production levels as well as enhance market efficiency and productivity along the entire supply chain are also key measures to fight inflation," he said.

- Bernama