Malaysian Budget Inadequate to Boost Economic Recovery: Analysts
October 30, 2000 - 0:0
KUALA LUMPUR Malaysia's 2001 budget sets the nation on the road to becoming a knowledge-economy but falls short of measures to boost growth in the immediate term, AFP quoted economists and businessmen as saying.
The 91.05 billion ringgit ($23.9 billion) budget, unveiled in Parliament Friday, is a "mixed bag" with little impact on the economy and insufficient measures to attract much-needed new investments, they say.
According to an AFP report, some economists have voiced concern over the size of Malaysia's fourth successive deficit budget, projected at 16.14 billion ringgit or 4.9 percent of gross national product.
They say the official forecast of 7.0 percent gross domestic product (GDP) growth in 2001 surpasses the market's average expectation of 6.5 percent.
GDP is now forecast to grow by 7.5 percent this year, up from an earlier estimate of 5.8 percent.
The announcement of the mild and uninspiring budget is expected to cap a stock market run, which has risen by 7.1 percent in the past three weeks.
Overall, the market is disappointed that there were no personal and corporate tax cuts, and that the 10 percent exit levy on profits was not totally scrapped, analysts say.
The levy was removed only for profits repatriated after one year.
Nizam Idris, regional economist with Singapore-based Ideaglobal.com, said the deficit budget showed private investment was still sluggish and economic recovery was not as broad-based as anticipated.
"The government is treading dangerously close to rough waters.
It will be tough to revert back to a balanced budget because of future debt servicing, amortization and so on," he said.
"It could also be inflationary, and adds pressure to interest rates." But rating agency Malaysia defended the deficit spending, saying it was necessary to balance out slower global economic growth expected next year and to set the foundation for the knowledge-economy.
It said a new 500-million-ringgit venture capital fund, higher budget allocation and tax incentives would help to crowd in private investment in information technology.
The Federation of Malaysian Manufacturers said the budget was a "resolute push to move head-on into the knowledge-economy." The Association of Banks in Malaysia said the budget would keep the economy on a sustainable growth path with an expansionary fiscal stance and supportive climate for private spending.
The 91.05 billion ringgit ($23.9 billion) budget, unveiled in Parliament Friday, is a "mixed bag" with little impact on the economy and insufficient measures to attract much-needed new investments, they say.
According to an AFP report, some economists have voiced concern over the size of Malaysia's fourth successive deficit budget, projected at 16.14 billion ringgit or 4.9 percent of gross national product.
They say the official forecast of 7.0 percent gross domestic product (GDP) growth in 2001 surpasses the market's average expectation of 6.5 percent.
GDP is now forecast to grow by 7.5 percent this year, up from an earlier estimate of 5.8 percent.
The announcement of the mild and uninspiring budget is expected to cap a stock market run, which has risen by 7.1 percent in the past three weeks.
Overall, the market is disappointed that there were no personal and corporate tax cuts, and that the 10 percent exit levy on profits was not totally scrapped, analysts say.
The levy was removed only for profits repatriated after one year.
Nizam Idris, regional economist with Singapore-based Ideaglobal.com, said the deficit budget showed private investment was still sluggish and economic recovery was not as broad-based as anticipated.
"The government is treading dangerously close to rough waters.
It will be tough to revert back to a balanced budget because of future debt servicing, amortization and so on," he said.
"It could also be inflationary, and adds pressure to interest rates." But rating agency Malaysia defended the deficit spending, saying it was necessary to balance out slower global economic growth expected next year and to set the foundation for the knowledge-economy.
It said a new 500-million-ringgit venture capital fund, higher budget allocation and tax incentives would help to crowd in private investment in information technology.
The Federation of Malaysian Manufacturers said the budget was a "resolute push to move head-on into the knowledge-economy." The Association of Banks in Malaysia said the budget would keep the economy on a sustainable growth path with an expansionary fiscal stance and supportive climate for private spending.