M’sia can hit 2016 growth target if oil stays above US$40
Malaysia can achieve the projected gross domestic product (GDP) growth of 4 percent to 6 percent next year if crude oil prices stay above US$40 per barrel, says Treasury secretary-general Mohd Irwan Serigar Abdullah.
He said the GDP growth target for next year was based on oil prices at US$48 per barrel and slower global growth, driven by private investment and consumption growth of 6.7 percent and 6.4 percent respectively.
However, he added, these are subject to changes such as capital flows and tougher financial situation in the wake of the US Federal Reserve’s announcement on an interest rate hike.
At a post-Budget 2016 press conference at his ministry today, Mohd Irwan said the government has a contingency plan and would only adjust the spending if oil prices dip below US$40 per barrel.
“So far, the oil price is hovering at around US$45 per barrel, or US$46 or even US$50, but as long as it does not touch US$40, we are okay,” he said.
Last Friday, Prime Minister Najib Abdul Razak tabled Budget 2016 themed ‘Prospering the Rakyat’.
When Budget 2015 was tabled in October last year, Mohd Irwan said, the oil price was US$100 per barrel, but it dropped to about US$55 per barrel in early January this year.
He said besides crude oil prices, Malaysia also faces economic challenges due to the moderation in China’s economic growth to a projected 6.3 percent next year.
“Our exports to China are quite large and we will be affected. That is why Budget 2016 is built on various taxes to boost domestic demand,” he said.
Mohd Irwan said the government has provided a lot of incentives and high-impact projects for the Malaysian Investment Development Authority (Mida) to take care of investments to further boost the economy.
He noted that projects such as Cyberjaya City Centre, Sime Darby Vision Valley and KLIA Aeropolis would spur and sustain private investment activities.
“With the tax incentives, we expect the middle-income group to have high disposable incomes to spend their money. Indirectly, this will spur consumption and investment will take care of the domestic economy to achieve 4 percent growth.
“With the additional exports and others, we can project a 4.7 percent growth.
Even the world economy is having a problem, (but) we have injected RM5.9 billion into our system for the 1Malaysia People’s Aid scheme,” he added.
To a question, Mohd Irwan said the government has no plans to increase the Goods and Services Tax (GST) rate as it has just been implemented this year.
‘No plan to increase GST rate’
He said the 6 percent consumption tax was implemented at the right time and has proven to be the saviour of the nation’s economy as its revenue would be given back to the rakyat, he said, adding GST revenue could cover the shortfall in the government’s income as a result of the drop in world crude oil prices.
“When GST was introduced, the oil-related revenue dividend was RM62 billion last year, dropping to RM44 billion this year after the government announced readjustment measures.
“So, this is almost a RM18 billion drop in oil-related revenue. Luckily, we introduced GST, and we are estimating to collect GST revenue of RM27 billion nett as of December this year,” he said.
Mohd Irwan noted the actual collection would be about RM32 billion but the government would refund about RM5.4 billion to companies for their input taxes and also refund tourists.
- Bernama
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