The fact that Budget 2016 has to be recalibrated is itself an acknowledgment that Malaysia is finally facing up to the global headwinds and the prolonged oil price slump. Not to mention, slowing domestic economic growth.
The country is still stubbornly holding onto its 2016 fiscal deficit target at 3.1 percent of gross domestic product and it reckons government debt is still manageable at 55 percent of GDP.
Anyway, PM Najib Razak on Thursday unveiled a series of revisions expected to save the government RM9 billion.
That of course, is based on the price of Brent crude oil staying within the $30 to $35 per barrel. (Note: At the time of Budget 2016’s earlier announcement, oil price was then just hovering around $40 a barrel. and unrealistic Putrajaya had based its projections on $48 per barrel price).
This means that the GDP growth outlook for 2016 has to be trimmed to 4%-4.5% from 4%-5%. The Goods and Services Tax however will remain – after all, it is a massive revenue earner for the beleaguered government. The GST imposed in April 2015 has helped to narrow Malaysia's fiscal deficit even as Malaysians suffer from a higher cost of living.
Still, the government are keenly aware of a growing public disaffection over rising costs. And the 2016 budget revisions are supposedly supportive for consumption although I don't think that is going to happen.
EPF contributions for employees are reduced by 3% from March 2016 to December 2017 although contributions from employers are unchanged. And a special tax relief of RM2,000 to individual tax payers earning RM8,000 a month for year of assessment 2015. Najib forgets that ordinary Malaysians are hurting.
Other measures, in my opinion, are just not noteworthy enough. The odds of fiscal slippage remain high with little maneuvering space, especially if oil remains on a significantly lower glide path and tax revenue is crimped by lower corporate profits and weaker growth.
This is the second year in a row that Najib had been forced to revise the Budget, after oil price fell from $110 to below $50 last year and made it necessary to reduce Budget 2015 last January.
We seem to have a government caught up in a time warp.
On Thursday, I was in Avenue 7, The Horizon in KL’s Bangsar South for the BP Asia BSC-Air Products Toastmasters Clubs joint-meeting.
I was fortunate to be given a speaking slot and I delivered CC#8 titled “Being Normal”.
Good attendance from both clubs and even a good meeting – in spite of the fact that Air Products’ Eddie Lai was absent because he’s in the US of A. His effusiveness may have been missed but that did not prevent us from having an enjoyable time.