Con­struc­tion sec­tor gets boost from Bud­get 2018

Sec­tor seen as one of the key ben­e­fi­cia­ries along with house­holds

The Star Malaysia - StarBiz - - News - By GANESHWARAN KANA ganeshwaran@thes­tar.com.my

PETALING JAYA: Malaysian house­holds and the do­mes­tic con­struc­tion sec­tor are the key ben­e­fi­cia­ries of Bud­get 2018, ac­cord­ing to sev­eral an­a­lysts.

RHB Re­search, which in­di­cated that Bud­get 2018 was broadly within ex­pec­ta­tions, said Bud­get 2018 sought to ad­dress the ris­ing cost of liv­ing and to roll out con­struc­tion spend­ing.

“While the strong fo­cus on fis­cal dis­ci­pline was en­cour­ag­ing, the bud­get’s pop­ulist slant con­tained mea­sures to ad­dress the ris­ing liv­ing costs with spe­cial fo­cus on as­sist­ing lower in­come groups and civil ser­vants.

“In ad­di­tion, it em­pha­sised on in­vest­ments in in­fra­struc­ture, ed­u­ca­tion, and skills devel­op­ment.

“The pro­pos­als are clearly pos­i­tive for the con­sumer and con­struc­tion sec­tors, and mildly so for prop­erty.

“The pro­posal to cut in­come tax rates ought to help to lift con­sump­tion, while the con­tin­ued pos­i­tive news flow for con­struc­tion is likely to sus­tain in­vestor in­ter­est in the sec­tor.

“On bal­ance, we ex­pect the bud­get pro­pos­als to of­fer a mild boost to mar­ket sen­ti­ment.

“All in, the bud­get good­ies came within our ex­pec­ta­tions, given the loom­ing 14th gen­eral elec­tions are ex­pected by next year,” said the re­search house in a note.

A to­tal of RM2.2bil has been al­lo­cated in Bud­get 2018 to in­crease home own­er­ship by de­liv­er­ing 258,000 units of af­ford­able hous­ing.

The bulk of the al­lo­ca­tion or RM1.5bil has been al­lo­cated to build 210,000 units of 1Malaysia Peo­ple’s Hous­ing (PR1MA) houses at be­low RM250,000 over the next two years.

Apart from that, the Gov­ern­ment has ex­tended the step-up fi­nanc­ing scheme in PR1MA projects to pri­vate hous­ing de­vel­op­ers, sub­ject to cer­tain con­di­tions. The ‘stepup’ fi­nanc­ing scheme would al­low bor­row­ers to ser­vice only the in­ter­est on the hous­ing loan for the first five or 10 years, be­fore ser­vic­ing both the prin­ci­pal and in­ter­est pay­ments for the bal­ance of the loan ten­ure.

The Gov­ern­ment has guided for a lower fis­cal deficit of 2.8% of gross do­mes­tic prod­uct (GDP) in 2018, com­pared to a deficit of 3% es­ti­mated for this year.

The coun­try’s econ­omy is also ex­pected to ex­pand by 5% to 5.5% next year, largely at­trib­uted by ro­bust do­mes­tic de­mand and sus­tained growth in the ex­ter­nal en­vi­ron­ment.

On the other hand, RHB Re­search projects a fis­cal deficit of 2.9%, with a GDP fore­cast of 5.4% for 2018.

Mean­while, CIMB Re­search said that fis­cal mea­sures for house­holds in Bud­get 2018 have crowded out al­lo­ca­tions for busi­nesses.

“De­spite lim­ited fis­cal band­width, Bud­get 2018 made room for ini­tia­tives to ad­dress long-term struc­tural bot­tle­necks such as in­fra­struc­ture, pro­duc­tiv­ity and in­cen­tives for new growth ar­eas.

“The two per­cent­age points cut in per­sonal in­come tax rates for the RM20,000 to RM70,000 in­come bands, was partly ex­pected.

“The tax sav­ings of RM300 to RM1,000 per in­di­vid­ual adds RM1.5bil into the pock­ets of tax­pay­ers and takes over the heavy lift­ing from the Ban­tuan Rakyat 1Malaysia (BR1M),” said the re­search house.

To­tal al­lo­ca­tion for BR1M was un­changed at RM6.8bil un­der Bud­get 2018 and house­holds with a monthly in­come be­low RM3,000 will re­ceive RM1,200.

As for house­holds earn­ing RM3,000 to RM4,000 a month, they will re­ceive RM900 while sin­gle in­di­vid­u­als earn­ing be­low RM2,000 a month will re­ceive RM450.

On headline in­fla­tion, CIMB Re­search has pro­jected a be­nign in­fla­tion­ary out­look next year. “Headline in­fla­tion in 2017 has ex­ceeded ini­tial fore­casts of 2% to 3% and the Gov­ern­ment has re­vised its 2017 es­ti­mate to 3.9% to re­flect devel­op­ments in global oil prices. Look­ing ahead, it ex­pects in­fla­tion to mod­er­ate next year be­tween 2.5% and 3.5%, which is in line with our fore­cast of 2.5%,” it said.

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