‘Focus on people’s welfare, technology’

KUALA LUMPUR: RHB Investment Bank Bhd expects the government to shift its focus from previous fiscal-discipline budgets to people-centric budgets with a higher expenditure of RM269.3 billion.

By keeping the fiscal consolidation intact from higher government’s revenue, the research house believes the government could place more emphasis on the country’s aspirations for the next 30 years under the Transformasi Nasional 2050 and economic development that uses technology.

“As the 14th General Election (GE14) is just around the corner, we believe the 2018 Budget will continue to be people-centric, and focus on developing the wellbeing of the people.

“We believe that the government’s measures and incentives would likely focus on setting the foundation for TN50, high-technology industries in areas of automation, robotic development, big data and cloud computing; tackling the rising cost of living, as well as further development of small- and medium-sized enterprises and affordable housing,” it said in a statement.

RHB Investment said the government could increase its expenditure next year by 4.3 per cent to RM269.3 billion from an estimated RM258.2 billion this year, on expectations of higher revenue from stronger oil prices and tax collection.

“Despite an increase in expenditure, we believe the fiscal consolidation drive remains on track and we project a budget deficit of about RM41.6 billion or 2.9 per cent of gross domestic product (GDP) for 2018, improving marginally from three per cent of GDP in 2017. This would likely be achieved on the back of higher revenue,” it said.

Looking forward, RHB Investment said the revenue was expected to improve by 4.5 per cent to RM226.9 billion next year, from RM217.2 billion estimated for this year.

This would be underpinned by an increase in income taxes, in line with a stronger economic growth next year, as corporate earnings and salaries rise.

“As a result, we believe the chances of the government cutting corporate and individual income tax rates for 2018 are not high.

“At the same time, revenue is expected to be supported by slightly higher oil prices for 2018, which would translate into higher petroleum tax revenue, as well as royalties.”

RHB Investment said the oil price assumption for next year was expected to be higher — at around US$52 (RM220) per barrel compared to an average price of US$52 per barrel for year-todate 2017 and US$45 per barrel budgeted for this year.

The collection in GST was expected to increase as RHB Investment expected consumption to remain strong.

“The upcoming budget announcement is expected to reveal the government’s GST target for 2018 – which would likely be higher, at RM45 billion, from RM43 billion estimated for this year.”