SERC: Adopt expansionary stance in budget

  • Business
  • Wednesday, 25 Sep 2019

PETALING JAYA: The government should take an expansionary stance when crafting Budget 2020 in anticipation of the slower economic growth and rising risk of a global recession, according to the Socio-Economic Research Centre (SERC).

“Budget 2020 policies can be crafted to allow some room for an expansionary stance, focusing on high impact sectors, quick gains initiatives and measures that would protect growth-enhancing spending and investment, ” the local think tank said in a statement here yesterday.

“The budget’s thrusts must aim at strengthening economic resilience, sustaining domestic spending and investment, save jobs, create jobs and help viable companies stay afloat, ” it added.

According to SERC, Malaysia’s budget deficit for 2020 would likely improve to around 3.2% of gross domestic product (GDP) from estimated 3.4% of GDP in 2019.

It expected gross development expenditure is estimated to rise 4% to RM55.5bil in 2020 from the estimated RM53.4bil in 2019.

SERC maintained this year’s GDP growth estimate at 4.7%, and forecast economic growth of 4.5% for 2020.

It expected private investment to expand moderately by 2.6% in 2019 and 3.5% in 2020, while export were estimated to grow by 0.5%-1% in 2019 and 2%-3% in 2020.

The moderate growth forecast for export was due to slowing global demand and negative spillover effects from trade hostilities.

On inflation, SERC estimated headline inflation to average lower at 0.8% year-on-year in 2019, compared with 1% in 2018, and 2% in 2020 as the anticipated pick-up in consumer inflation, mainly from fuel-related items to remain weak.

“Pending the implementation of targeted fuel subsidy scheme for RON95, there could be some upside risks to the petrol prices. Even with the removal of RON95 price cap, prices are expected to be on the low side in line with softening global crude oil prices, which are affected by slowing global economy and the intensified trade tensions. That said, volatile crude oil prices remain a wild card, ” it said.

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