Prime Minister Datuk Seri Najib Razak’s Budget 2011 announcement has been given a muted welcome by analysts, with some still waiting for the oft-touted economic reforms that are to send Malaysia on its way to developed-nation status.
RAM Holdings chief economist Yeah Kim Leng
It’s a consultative budget that’s why most initiatives are in line with the Economic Transformation Programme and 10th Malaysia Plan. Some quarters were looking for more election goodies but that doesn’t seem to be reflected in the budget. We see a small increase in spending levels but we’re not uncomfortable with it as the external environment could pose headwinds. We would have wished for more liberalisation but we do recognise the budget constraints.
OSK Research head of research Chris Eng
We are fairly neutral and see slightly more positive surprises than negative surprises. There was the announcement that there would be no increase in toll rates for five years, no increase in beer excise duty, abolishment of import duties, no loan-to-value market cap, and stamp duty discount for first time home buyers. On the negative side, there is the service tax increase. The property, construction and consumer sectors will benefit most.
CIMB Investment Bank chief economist Lee Heng Guie
The budget revolves around the transformation theme. It will meet the agenda to transform the nation over the next 10 years. The increase in service tax is a minor negative surprise. The budget will also intensify human capital development. The only part I am not comfortable with is the operational expenditure increase, mainly due to additional expenses from the National Key Economic Areas. Malaysia has had healthy operational surplus in the past but this year it has been reduced from RM10 billion to RM3 billion. The average is about RM13.9 billion. However, I draw comfort from the fact that the intention for subsidy reduction remains.
Standard Chartered economist Alvin Liew
Most people expected similar numbers as in the budget. The budget deficit is not much lower than last year and if you’re a ratings agency, you’ll be worried. The introduction of the stamp duty discount for first time homebuyers and no caps on the loan-to-value ratios are indicative of upcoming polls.
HwangDBS Investment head of equities Gan Eng Peng
This is a market neutral budget as the bulk of the market moving announcements have already been factored in, with the evidence in the recent strength in construction and building material stocks. The 2011 Budget is focused on achieving the recently announced Economic Transformation Plan, which essentially benefits key stock market sectors like construction, building materials and property.
Some of the funding for the mega projects remains unclear. The private companies would not be able to fund it without explicit government guarantees involved. The market is weary of too many government guaranteed semi-government entities coming to the market to raise money. This is in effect government “off balance sheet” fund-raising and if added back to the budget, is in fact increasing the deficit. So while there is a reduction of budget deficit and direct government.
