3 Measures To Drive Economy
A total of RM20.7 billion will be contributed to increasing the disposable income of the people through three measures announced by the government.
The main contributor to this is the zero-rating the Goods and Services Tax (GST), effective June 1. This will result in RM17 billion of combined savings by Malaysians for the rest of the year.
GST will be replaced by the Sales and Services Tax starting from September 1 this year.
The second measure that is expected to release RM3 billion to the people is the move to stabilise the prices of RON95 and diesel at RM2.20 and RM2.18 per litre respectively.
The final contributor comes in the form of Hari Raya special assistance for civil servants and pensioners, which total RM700 million. This will benefit 1.2 million out of the 1.6 million civil servants.
These measures would drive consumer spending, as well as improve consumer optimism and business profits, said Finance Minister Lim Guan Eng.
However, experts are concerned that these measures may result in a higher budget deficit of the country, with some economists estimating it to be above 3% of the Gross Domestic Product (GDP).
Lim assured that the government will maintain the budget deficit at 2.8% of the GDP through several measures.
One of these measures is cutting RM10 billion from government expenditure through the deferment, review, and renegotiations of “high-price projects”.
Some of these “high-price projects” are the renovation and rehabilitation works of Sultan Abdul Samad building in Kuala Lumpur that cost RM350 million, the cancellation of the High-Speed Rail (HSR) and mass rapid transit phase 3 (MRT3) projects that are worth at least RM100 billion, and cutting of expenses in non-essential professional and consulting services, refurbishments, events and promotional activities and selected ICT upgrading.
The government also expects to get an additional RM5.4 billion in petroleum taxes from the rise in global crude oil prices. Budget 2018 was prepared based on crude oil price of US$52 (RM207) per barrel. However, the price of crude oil is expected to average US$70 (RM278) this year.
Additional revenue can also be expected from government-linked companies, such as Khazanah Nasional Bhd, Bank Negara and Petronas in the form of dividends, totalling RM5 billion, while RM4 billion will be contributed with the implementation of the SST.
The net effect on the overall Federal Government budget is an increase in deficit by RM300 million to RM40.1 billion.