BUDGET 2018 | Prime Minister Najib Razak announced a populist budget today that targets his party's traditional vote base, as he looks to shore up dented support ahead of a tough election that must be held by August.
Najib, whose term ends in June, is under pressure to win over voters upset with rising soaring costs and a corruption scandal at state fund 1MDB.
"I stand here today...to bring happy news that will put a smile on everyone's faces," Najib said at the start of his budget speech to Parliament.
Malaysia's higher economic growth and revenue this year, aided by higher oil prices, allows Najib to propose higher spending ahead of elections, but at the same time project a lower fiscal deficit in 2018 than for this year.
The government will spend a total of RM280.25 billion in 2018, up 7.5 percent from this year's anticipated expenditure of RM260.8 billion.
Spending will include aid packages worth RM6.5 billion for farmers, fishermen and rubber tappers, the largest allocation yet for the groups who are among key voters for Najib's ruling BN coalition.
Najib also located RM6.5 billion for rural infrastructure development, and waived tolls from key highways in several cities. Big allocations were also made for road projects and schools.
The prime minister announced an allocation of RM6.8 billion, same as the previous year, for an annual cash handouts programme. He allocated RM3.9 billion for goods and transport subsidies and set aside RM2.2 billion to help home ownership under various programme.
Income tax will be cut by two percentage points for those earning RM20,000 to RM70,000 a year.
Najib was widely expected to present a populist budget to try to boost support for his party as a time former prime minister Dr Mahathir Mohamad, who has quit the party, leads a vigorous effort to remove the leader.
Najib has also been dogged by a multi-billion dollar scandal tied to state fund 1MDB, a fund that he helped set up. He has denied any wrongdoing.
Southeast Asia's third-largest economy expects full-year growth at 5.2-5.7 percent this year, rebounding strongly from 4.2 percent in 2016.
Growth is seen at 5.0-5.5 percent next year.
Despite increased spending, the fiscal deficit is seen narrowing to 2.8 percent of gross domestic product in 2018 from three percent this year.
Najib said his administration remains committed to narrowing the fiscal deficit, saying "What is important is government maintain fiscal consolidation target".