THE GOVERNMENT expects the Malaysian economy to expand at a steady pace of 4% to 5% in 2017 despite the external uncertainties for global growth and trade, which could further destabilise the outlook for oil-exporting and emerging economies.
In his preface to the report on Friday, Datuk Seri Najib Tun Razak said the government has put in place proactive measures in the face of the protracted period of low oil prices and volatile financial markets.
Brent crude oil price assumption in 2017 is at average of US$45 per barrel due to the global glut.
“Being an open economy, we need to be mindful of these risks that may adversely impact our country,” he said, adding the Malaysian economy remains resilient amid a challenging external environment.
Najib, who is also the Finance Minister, will present the RM260.80bil Budget 2017 in Parliament on Friday which will be rakyat-centric to raise the disposable income especially the bottom 4%0 and middle 40% households (M40).
Underpinning the GDP growth for 2017 will be the manufacturing and services sectors which are expected to grow at 4.1% and 5.7%.
The government envisages a rebound in the agriculture sector of 1.5% from a contraction due to the El Nino this year while the construction sector is expected to expand at a slower pace of 8.3%.
With the government's commitment to boost revenue and rein in expenditure, the fiscal deficit is expected to narrow from 3.1% of GDP in 2016 to 3% in 2017.
He said the country would continue to take proactive measures and work together as a nation and leverage on digital technology, innovation and creativity.
“These factors will enable us to further strengthen our economic fundamentals and withstand external uncertainties. I am confident that being united, steadfast and forward looking, we can build a competitive and resilient economy
“This will enable us to achieve advanced and high-income status by 2020, bringing prosperity and better welfare for the rakyat and the nation,” he said.
Looking at 2016, Najib said the government was confident the economy would grow at between 4% and 4.5% after expanding 4.1% in the first half of 2016.
“Growth was supported by strong domestic economic activity, particularly private investment and consumption,” he said, pointing out the steady growth was supported by the pro-active measures.
He recalled that the 2016 Budget was re-calibrated on Jan 28 this year as the country faced headwinds from the challenging external environment, particularly after the prolonged low commodity prices and heightened volatility in the financial markets.
However, the country's macroeconomic foundations have improved significantly, in particular, after the implementation of the National Transformation Policy in 2009.
As for public finances, he said the government's various fiscal consolidation measures had successfully reduced the fiscal deficit from 6.7% of GDP in 2009 to 3.2% in 2015.
Najib envisaged the fiscal deficit to be reduced to 3.1% in 2016, adding the government was committed to achieving a near balanced budget by 2020.
“Meanwhile, Malaysia's financial system remains resilient with domestic financial markets continuing to function in an orderly manner to support the economic activity.
“Further, the banking system is well-capitalised with ample liquidity. The ringgit has been stable against the US dollar and other major currencies,” he added.
As for the rakyat, he said Malaysia is a “success story in shared prosperity”, quoting the World Bank's reference to the country. Per capita income has increased to RM36,078 in 2015 from RM34,839 in 2014, he said.
Since 2009, an additional 5.5 million Malaysian have access to basic necessities such as clean water, 24-hour electricity power supply and road connectivity. In addition, hardcore poverty has been eradicated, while incidence of poverty has fallen to less than 1%.
Najib said the government will continue to carry out rakyat-centric programmes and projects, including concerted efforts to mitigate the rising cost of living, providing affordable houses, quality healthcare, education and skills training.
“This will enable the rakyat to enjoy higher standard of living, particularly the B40 households,” he said.
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