A budget of RM 232.8bil for 2012 comes with a lot of goodies for the government servants and the lower income group. For those in the private sectors there is nothing to shout about except the employer has to increase contribution to EPF! I am not an economist but looking through engineer’s perspective on macro view.
I just couldn’t remember when was the last time we have ‘belanjawan berimbang’? For several years we have seen deficit budgets and currently has accumulated to RM456bil (53.5% of GDP). It seems that it is a practice to produce a deficit budget every year and including next year knowing very well looming uncertainties in global economy. A deficit budget of 5.4% in 2011 to 4.7% in 2012, will this be achievable? The government income is from taxes and if there is a recession ,trading activities will be minimal,hence the tax collected will be reduced, the deficit will increase. The budget has not included the expenses for the mega project like MRT (if I am not mistaken). With the cost of RM58bil for the MRT which is to be borne by the government spread over three years, will definitely increase the country’s debt. Countries which have over 60% debt / GDP like Greece, Spain, Italy and Ireland are currently facing economic problems.
Its good to have My First Home ceiling increases from RM 220k to RM 400k. A graduate from government sector earns Rm3000 and those from private sectors earn between Rm 2000-2500 could not afford the RM220k house if they do not have double income. The cost of houses at Klang Valley has gone up artificially. Link houses are in the range of 600k.One can get a good semi-d in Seremban for 200k. People are borrowing heavily to have the necessities such as houses and cars. The household debt/GDP is increasing from year to year and currently at 76% (major portion is on houses and cars).The increase of 10% tax on RPGT for houses sold within 2 years of purchase, I believe will have small impact. If serious enough the tax should be higher and a longer period will definitely have an impact to curb speculation.
The GDP forecast of 5%-5.5% for 2011 is very optimistic. In 2010 the GDP was 7.9% and the 1Qr 2011 was 4.6% and 4.0% in the 2Qr 2011. The downtrend was due to external factors especially the debt crisis in US and Euro zone. The situation in US and Euro zone has not improved since the last economic slowdown in 2008 and will continue until next year or so. Although there are a lot of goodies in the budget to spur domestic spending but this will be effective only next year. The people in construction business will agree with me that the ETP project will not get off the ground until the middle of next year. Hence the growth could not be more than 5% but according to analyst could be around 4%-4.2%.
The GDP forecast for 2012 is 5%-6% and again is too optimistic . Looking back at the downtrend and economic slowdown in US and Eurozone, analysts have anticipated recession in 2012, our economy will be affected too. It is noted that 26% of our export are from electronics and this year it has reduced almost by 5%. During economic slowdown people will be cautious in their spending and the budget goodies are not big enough to have impact on domestic consumption. The MRT project and other ETP projects are for big players and will definitely will spur the internal spending. However we have seen during the 1998 many mega projects such as Putrajaya, Bukit Jalil Complex and LRT were on ground and yet our country did not escape from recession. Internal spending alone will not prop but will cushion the GDP in view of weak external environments. Hence a growth of 5%-6% is hard to achieve but a figure around 3.8%-4% as analyst predicted is manageable.
Ir.GHAZALI IBRAHIM
