Improved oil prices likely to boost growth

KUALA LUMPUR: The 2018 Budget could tilt slightly towards economic growth due to the improvement in oil prices, said Credit Suisse.

The research house also expects the worst of the fiscal drag to be over as the government should have additional revenue next year, given the better oil prices.

“It will likely be the key focus for many investors given that the general election must be called by August 24 next year,” said Credit Suisse economist Michael Wan.

Recently, Treasury secretarygeneral Tan Sri Dr Mohd Irwan Serigar Abdullah was quoted as saying that the budget would look at export growth, investments and cost of living.

The dividends from national oil company Petroliam Nasional Bhd make up around one per cent of gross domestic product (GDP).

“We expect some additional big-ticket infrastructure projects to be announced, while there will unlikely be further subsidy cuts,” said Wan.

He expects a narrower headline fiscal deficit target from the current three per cent of GDP.

Credit Suisse has maintained its above-consensus forecast of GDP growth at 5.6 per cent.

Although the strength in GDP will fade somewhat in the second half of the year, Wan does not expect to see a sharp slowdown.

“Most importantly, the labour market continues to heal, with employment growth starting to pick up and unemployment slowing over the past six months, indicating that the economy is not just concentrated in the public sector.” Rupa Damodaran