THE economy is expected to grow at a lower pace next year compared with 2015 as the government projects slower growth in the manufacturing, services and construction sectors.
The report said GDP was expected to expand between 4% and 5% in 2016 compared with the 4.4% to 5.5% growth estimated for the current year.
Domestic demand was expected to offset the drag on the economy from a slowdown in growth in emerging markets, particularly China.
Lower commodity prices, depreciating currencies in emerging markets and volatility in financial markets will be hurdles to economic growth.
However, these would be counterbalanced with activity by the private and public sectors, with private expenditure the main anchor while public expenditure will increase moderately.
To boost the economy, the Government has raised allocation for development spending by 6.1% to RM49.2bil, while operating expenditure will remain at RM215.2bil.
The increase in spending will be matched by higher revenue in 2016 forecast at RM225.6bil. The fiscal deficit in 2016 is projected at 3.1% of GDP.
Trade surplus is projected to be higher in 2015 at RM85.3bil, or 7.3% of GDP.
Debt level
Household debts level remained high at 88.1% of GDP at end of August, up from 86.8% of GDP at the end of 2014.
Fiscal consolidation
The government will continue its fiscal consolidation in 2016 as it seeks to achieve a balanced budget by 2020 but it acknowledges there will be challenges from external sources.
It emphasises that while it ensures strong public finances, fiscal policy will continue to support economic growth and improve the people’s well being.
“With all the measures in place, the fiscal deficit is projected at RM38.8bil or 3.1% of GDP in 2016 (2015: 3.2%),” it said.
The fiscal deficit has come down from 6.7% in 2009 to 3.4% of GDP in 2014.
Revenue collection
For instance, collection from oil-related revenue is expected to increase by 1.7% to RM265.2bil (2015: RM260.7bil).
Due to the implementation of the managed float fuel pricing system, subsidies, incentives and assistance will remain low at RM26.1bil (12.1%), reflecting a more targeted subsidy mechanism to reduce market distortions and leakages.
GST
The government projects to collect RM39bil from the Goods and Services Tax (GST) in 2016 – which is about 3.1% of the GDP as it seeks to achieve a balanced budget by 2020.
Since the GST was implemented in April, collection was RM27bil, higher than the earlier projection of RM21.7bil.
For 2016, GST’s collection will reflect a full 12-month of the tax implementation that had replaced the Sales and Services Tax (SST).
The higher collection will offset the contraction in oil-related revenue that has been the main revenue source for the Government.
Inflation, employment
Inflation rate is expected to increase from 1.9% in 2015 to between 2% and 3% in 2016.
However, the government expects the unemployment rate to decline from 3.1% in 2015 to 2.9% in 2016.
Strong economic fundamentals such as benign inflation and stable employment supported by accommodative monetary policy are expected to support growth.
Medium-term fiscal framework
The government also announced under the medium-term fiscal framework (MTFF) for 2016 to 2018, its revenue was estimated to be RM729.50bil.
The projection for the three years was based on the assumption that US light crude oil would be between US$48 and US$60 per barrel and oil production to be 600,000 barrels per day.
On Friday, US crude oil was trading below US$46, which is sharply lower than the near US$100 in July 2014.
The three-year framework expects non-oil revenue to be RM631.60bil and non-oil revenue RM97.9bil.
The government’s operating expenditure is expected to be RM685.7bil during the period and gross development expenditure RM153bil.
http://www.thestar.com.my/Business/Business-News/2015/10/23/The-very-rich-to-pay-more-income-tax/?style=biz
http://www.thestar.com.my/Business/Business-News/2015/10/23/Domestic-demand-to-drive-GDP-growth/?style=biz
http://www.thestar.com.my/Business/Business-News/2015/10/23/Business-highlights-of-Budget-2016-proposals/?style=biz
Already a subscriber? Log in
Get 20% OFF The Star Digital Access
Cancel anytime. Ad-free. Unlimited access with perks.
