Budget 2016: Too rosy?

From a member in a WhatsApp Group:

  • PM said economy is nothing like 1998
  • Following are highlights of the 2015/2016, Economic Report issued by the Finance Ministry in conjunction with the tabling of the 2016 Budget today by Prime Minister Datuk Seri Najib
  • ST to rake in RM39 billion in 2016 (3.1% of GDP) (2015: ests RM27 billion from April) *44% increament!*
  • Malaysia’s GDP to remain on a steady growth in 2016, to expand between 4.0% to 5.0% (2015:4.5-5.5 pct)
  • Growth in Malaysian economy to be driven by domestic demand with private expenditure to remain the main anchor
  • Malaysia’s fiscal deficit is projected to decline to RM38.8 billion or 3.1% of GDP in 2016 (2015: 3.2%)
  • Federal gov rev collection in 2016to grow marginally by 1.4% to RM225.7bn – due to higher collection of tax revenue
  • Oil-related revenue to drop 14.1% in 2016 due to lower global crude oil prices (2015: 19.7 pct)
  • The Federal gov expenditure to increase 1.7% to RM265.2bn in 2016 (2015: RM260.7bn)
  • Of the RM265.2bn Federal gov expenditure, 81.1% allocated for opex while 18.9% for development expenditure.
  • Opex in 2016 to increase marginally by 0.9% following continuous efforts to rationalise and optimise government spending
  • The dev exp is expected to +5.4% in 2016 which RM30.3bn would go to the economic sector
  • The security sector would be provided RM5bn in 2016 to enhance the capability of the armed forces and police
  • A total of RM1.6bn would be allocated next year for general administration sector for upgrading of government facilities nationwide.
  • Domestic demand is expected to register a growth of 5.5% in 2015 driven by private sector spending
  • Private investment to increase 6.7% in 2016 with the bulk of investment in the manufacturing and services sectors
  • Private consumption is anticipated to expand 6.4% in 2016, benefitting from stable employment prospects and favourable wage growth
  • Public investment to record a higher growth of 2.3% in 2016 from 1.6% in 2015 supported by new projects under the Economic Transformation Programme and 1MP and the ongoing projects under the 10MP
  • Services sector is projected to grow 5.4% in 2016 and increase its share to 54% of GDP from 53.8% in 2015 with all sub-sectors continuing to expand
  • Inflation to remain stable at 2-3% in 2016 (2015:2.0- 2.5%)
  • Nominal GNI per capita to increase 5.6% to RM38,438 2016 from 4.2% anticipated growth to RM36,397 in 2015
  • Malaysia’s current account to post a surplus in the range of 0.5% to 1.5% of GNI compared with a surplus of 1.5-2.5% expected in 2015
  • Gross exports are expected to rebound 1.4% in 2016 from a -0.7 % in 2015 supported by higher public investment and capital spending in the manufacturing and services sectors.
  • Malaysia’s 2016 external position to remain encouraging in line with better growth prospects for regional and advanced economies, reinforced by steady expansion in the domestic economy
  • The outlook for world trade is projected to improve next year
  • The deficit in the services account next year is expected to improve to RM11.4bn from RM14.7bn in 2015
  • The Federal Government debt remains within prudent limit, and is well capped at 55% to GDP, placing Malaysia among medium-indebted countries 
  • Offshore borrowings remained manageable at 1.6% of GDP, despite the appreciation of the USD
  • Malaysia’s financial system remains strong this year despite heightened challenges, i.e declining commodity prices and MYR
  • The East Coast Economic Region (ECER) has attracted RM78bn in investments since its inception in 2007, accounting for 71% of the RM110bn target by 2020.
  • Insurance and Takaful Industry performance remains resilient with strong capitalisation and improved profitability.
  • Trade surplus is expected to be higher at RM85.3bn or 7.3% of GDP in 2015 (2014:RM82.5bn; 7.5%)

[23/10 20:07] senatordatukakbarali: If the above summary is factually correct as presented by YAB PM/MOF I, then it seems too good/rosy to be true, Dk.

RESPONSE FROM A VERY RELIABLE MEMBER OF THE ADMINISTRATION:

The above summary estimate n forecast is correct,Tok. However how far we can achieve those figures in 2016 will depend on many external factor issues. ie whether oil price will remain at current level or will it drop further, how vulnerable will be China economy going forward as China is currently our biggest trading partner. Will our currency will remain at current level. Will world demand for commodities like oil palm n rubber will remain strong.

MY OBSERVATIONS:

I believe the govt shld be more balanced in its presentation of the realities..then it will be seen as more credible & hence will regain the lost trust/ improve its severe trust deficit.

I can quite agree, for example, with the projected inflation of 2 – 3% bcoz of technically higher base but M’sian economy is forecasted “to remain on a STEADY growth…” is not bluffing but not telling the truth either.

If one can plot the graph, our GDP growth rate actually continues to dive south for the last few years into 2016 and probably into 2017.

According to latest IMF WEO, growth for 2015 is forecasted to be 0.3% lower than 2014 & 0.2% lower than the earlier forecast and down risk for 2016 is higher.

Hence how could our “external position to remain encouraging”? Also when oil prices are expected to trend lower, recovery in advanced economies is fragile, China is struggling to reverse it’s declining growth, etc?

Re GNI Per Capita. ..when presenting 2015 budget, the forecasted figure was RM35,572. With a revised LOWER GDP growth rate for 2015 how come our GNI Per Capita can INCREASE by RM825 to RM36,397? That’s an additional sum of almost RM25b!!!

Noteworthy that from the said forecast (not mine but similar to my earlier projection), it’s becoming increasingly clear that we won’t be able to achieve high income economy as defined. Agree?

So EPU has to revisit my article “RMK11: Merancang Untuk Gagal?”

Lagi satu yg agak melucukan…”stable employment prospects and favourable wage growth”.

There are stories of retrenchments, closing down, VSS, MSS, govt itself is freezing new intakes, etc. Unemployment rate has already climbed from 2.9% to 3.1% (still full employment tho’). New jobs are given to foreigners or grabbed by PATI.

Favourable wage growth? How many %?

PEMANDU forecasted there will still be 7 millions workers earning less than RM2,000 per month in 2020! Perhaps in real wages it could be around RM1,500 by then.

image1

Additionally, re our short term prospect, our latest leading indicators showed our economy will continue to expand albeit at a slower rate.

Take a look at @Akbar_Ali’s Tweet: https://twitter.com/Akbar_Ali/status/657632844399931393?s=08

Our manufacturing sector largely depends on imported capital goods & intermediate goods. These have declined by 3% & 2% respectively… hence the predicted slower growth.

Our final private consumption growth had slowed down from 7.2% (2013) to 7.0% (2014) & to 6.4% (2Q2015).

Our fixed capital formation is also on the same slope during the same period: 8.2%, 4.8% & 0.5% respectively. These are the figures starring at us.

Then again about a potentially huge financial crisis (2106 – 2018) that have been predicted/ quoted/mentioned in various forum / media.

Concensus: predicted it will happen in 2017 but some thought it would be earlier.

I did mention this in para 34
https://darahtuah.wordpress.com/2015/08/17/rmk11-merancang-untuk-gagal-2/ .

Hence the cry for Plan B (if RMK11 is Plan A).

Does Budget 2016 take cognizance of this potential financial tsunami or is oblivious to it?

Shouldn’t the government turn this threat into an opportunity to rally and unite the rakyat to support it during this trying time for the common good?

However, indeed there are also good things the government is trying to do thru the Budget, as commented by others.

Some acknowledgments and appreciations are due.

COMMENTS FROM A MEMBER IN THE GROUP:

The other factors is domestic demand .Consumers are tired and they are not spending like before due to uncertainty Demand for properties declining which is healthy and hopefully companies diversify to more productive investment .There is a misallocation of resources in the private sector due too much focus on property developnent and not to more greenfield investment like solar energy and high value more innovation driven sector.

As a business owner i am.feeling the growing pressure of slow payment including more request from clients for our services on rationalisation and consolidation.

I am putting more people on contract and freeze permanent placement as growing pressure on my cashflow with over 350 high end consultants with slow payments from clients.This is the real world on the ground a more micro outlook.

It’s keeping awake at night but thats life of business owners as many of us will have go through this phase and our business sustainablity is at risk.Too large bumi Ict companies had closed within this year xxxxxx and xxxxxx and some thinking of selling off to foreign companies.

For example xxxxx called for a tender for a large Ict projects recently and out of 7 tendered i have to face 4 indian companies, xxxxxx and only one other msian companies.Indian companies very competitive as resources from India.

Companies very sensitive and they just may award on price and here we may have a real issue ob jobs whereas i have 350 msian and they are not as cheap as the Indian.Its a paradox and i have been pushing for consolidation and scaling up of bumi ict to meet global competition.

This are all private sector decisions and they are market driven.Its about our bumi companies able to compete with foreign companies or they will disappear .This is my own story which i face daily as the Ict is a highly liberalised sector except in the govt sector.But you can survive depending on govt alone.

Now competition is becoming tougher they are exiting their business eg xxxx xxxx and many others .Its going to be tougher to create these business communities again after so.much been given to them in the past to grow.They must be resilient and competitive.

, , ,

  1. #1 by 300 million for PMSI again on October 25, 2015 - 5:00 pm

    An item of nearly 400 millions ringgit to implement PMSI again after Pemandu ran a seditious so called survey to justify using english as bahasa pengantar KAJIAN PERSEPSI: KEPENTINGAN PENGUASAAN BAHASA INGGERIS/ GENERAL PERCEPTION: IMPORTANCE OF ENGLISH PROFICIENCY
    Guess who will get this millions…pmsi failed at 5 billions by mahahthir…but some still want to make money from the teaching of english..

    It is not about perception. Its about nation hood. About malayness about being us..

  1. 5 Lagi Sebab Mengapa Kepimpinan Rejim Najib Ini Terburuk Dalam Sejarah | Jebat Must Die

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