KUALA LUMPUR – Malaysia’s government will likely present an expanded budget on Friday to temper a weak economic outlook, as it grapples with global recession fears, the protracted U.S.-China trade war and a large debt pile left behind by its predecessors.
Southeast Asia’s third-largest economy bucked a global cooling trend and grew faster than expected over the first half of 2019, but analysts say growing protectionist policies around the world will eventually drag on the trade-reliant country.
Prime Minister Mahathir Mohamad’s government will at the least need to sustain its development spending to prop up domestic demand next year, economists have said, even as it continues to deal with 1 trillion ringgit ($238.66 billion) in debt that has been blamed on embattled former premier Najib Razak’s administration.
“We think Budget 2020 will likely include a contingency plan to counter the effects of a slowdown from the US-China trade war – a “so-called” mini fiscal stimulus package,” RHB Investment Bank said in a note.
The contingency fund, which the bank estimated could amount to 3 billion ringgit ($715 million), will be on top of an estimated 55 billion ringgit that the government will likely set aside for its 2020 development budget, RHB said.
Mahathir’s government bucked expectations when it tabled an expanded budget in November, in a bid to boost revenue despite the slowing economy. It also set a higher fiscal deficit target over the next few years to make room for domestic spending while chipping away at its debt. (Full Story)
China and Malaysia resumed a massive “Belt and Road” train project in July at a heavily discounted cost after a year-long suspension of the project by Mahathir, who followed through an election pledge to renegotiate or cancel “unfair” Chinese mega-projects approved by his predecessor Najib. – Reuters