Prime Minister Dr Mahathir Mohamad's last budget due later today is expected to be a package of prudent but supportive policies to help consumers and sustain an economic recovery, analysts said.

They said the 2004 budget, the last for Mahathir before he retires next month after 22 years in power, is designed with an upcoming general election in mind and so can be expected to be voter-friendly.

The government under Mahathir's successor and current deputy, Abdullah Ahmad Badawi, is widely anticipated to call elections before the middle of next year although the current five-year term expires only in November.

"It will be a people-friendly budget because it is just before elections and it will be Mahathir's last," said Christopher Leow, a fund manager at PacificMas Asset Management.

"I'm not looking so much at tax cuts. The bigger issue is for the government to address the budget deficit."

This is likely to be Malaysia's seventh consecutive budget deficit but analysts say it should not exceed five percent of gross domestic product, focusing on boosting foreign investment and cutting government spending.

Goodies in store

The 2003 budget deficit is expected to hit 3.9 percent of GDP, down from an earlier estimate of 5.1 percent. The deficit was 5.6 percent of GDP in 2002, 5.5 percent in 2001 and 5.8 percent in 2000.

Mahathir, who is also finance minister, may also offer some goodies in his "farewell" budget to "reward the people" but there is no clear consensus on whether there will be a cut in corporate or personal income tax, analysts saod.

Malaysia last cut corporate tax in 1998, which at 28 percent still sits higher than the 22 percent in economic rival Singapore - itself committed to shaving two percentage points off by 2005.

Ngu Chie Kieng, head of research at TA Research, said foreign investment rules may be liberalised further and a people-friendly budget would likely contain measures to boost consumer spending.

RAM Consultancy Services chief operating officer Yeah Kim Leng said the budget would focus on sustaining economic growth and competitiveness.

"The key strategy will be on retaining existing FDI (foreign direct investment) and attracting new FDI in areas that will promote economic upgrading from manufacturing to services ... and promote productive investments," Yeah said.

Sin taxes

A personal income tax cut, along with a staggered reduction in pension fund contributions, may be on the cards to put more money into consumers' pockets, he said.

This may be offset by higher 'sin' taxes with the tobacco sector a likely target, analysts said, although the gaming industry may escape given the government's recent move to lower its tax burden in January.

Other analysts picked the technology sector, as well as research and development, as beneficiaries while the property may take a backseat along with tourism as incentives had been given them in a RM7.3 billion ringgit economic stimulus package announced in May.

Analysts said the automotive sector, seeking a clearer policy on import tariffs ahead of the implementation of the Asean Free Trade Area in 2005, may be disappointed this year. - AFP