Standing at RM280.25billion and being the final one to be tabled before the next general election, Budget 2018 is predictably a rakyat-friendly one.
“We are pleased to see the latest budget demonstrated the Government’s desire to improve the standard of living and well-being of the people, but remain focused on exercising fiscal discipline to accelerate the nation’s economic direction and providing positive implications to the capital market,” said Hanifah Hashim, Chief Executive Officer of Franklin Templeton GSC Malaysia.
The budget announcement of RM280.25billion is seen as a welcome move that will help ensure sustainability of the country’s economic growth. For 2018, fiscal deficit is set to be at 2.8% and the projection for GDP growth at range of 5.0%-5.5%.
“We applaud the Government’s move to address the rakyat’s concern about the rising cost of living, which affects private consumption – an important growth indicator of an emerging market economy. With further reduction in individual income tax rates and income-generating initiatives announced through Budget 2018, we hope that it would spur spending leading to higher consumption growth for the people. The multiplier effect from higher spending will inherently lead to higher economic activity, contributing towards higher Government revenue come 2018, whether through GST or corporate and income taxes,” she said.
Malaysian bond market development has largely been achieved through the exceptional growth of the corporate bonds and Sukuk markets. Improving ringgit along with the raised infrastructure and development expenditure to boost domestic demand and ease the Rakyat’s housing concerns for example, has resulted in higher issuance in the bond market in 2017, and the trend is likely to continue in 2018.
While investor sentiments are mixed on the upward turnaround trend of Malaysian stocks, bonds and other financial assets investments in the first half of the year, we are confident the country will continue to be resilient on the back of strong domestic demand and robust exports.
“Normally, an expected pick-up in growth in 2018 with growth forecast at 5-5.5% will raise bond yields. However, with inflation expected to reduce to 2.5% to 3.5% in 2018 from 3% to 4% in 2017 couple with continued fiscal consolidation and diversification of government revenues away from petroleum, we expect OPR to remain accommodative with an upward bias in 2018.”
