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2008 Budget Must Boost Defences Against External Shocks
By M.Saraswathi
KUALA LUMPUR, Sept 5 (Bernama) -- Malaysia must bolster defences against external shocks in its economic strategies, otherwise it will bring to nought the best laid out policies, tax experts and analysts say.
This should be the strategy in its development plans including the 2008 Budget given the adverse fallout from the 1997/98 financial crisis and more recently the U.S. sub-prime mortgage credit crisis.
"We must prepare for the spillover effects from such problems," Dr Veerinderjeet Singh, Taxand Malaysia Sdn Bhd's Managing Director, said during a Roundtable on the 2008 Budget organised by Bernama here Wednesday.
He expressed concern that the U.S. might slip into recession in a worst case scenario which would have global consequences, from which Malaysia might not be spared more so given its substantial trading linkages with the United States.
Inter-Pacific's Head of Research, Anthony Dass and Yong Poh Chye, the executive director of Tax Advisory and Management Services Sdn Bhd were the other panelists at the Roundtable chaired by Bernama Editor-in-Chief Yong Soo Heong, Deputy Editor-in-Chief for Bernama Economic Service Salbiah Said and Bernama Economic Service Editor Mikhail Raj Abdullah.
Anthony said that even without the subprime mortgage crisis, there was a slowdown in the U.S. economy which affected exports.
Against such a backdrop, "the government is expected to continuously spearhead growth via pump-priming efforts mainly to spur domestic consumption."
He said the government would raise the allocation for development expenditure to RM48 billion in Budget 2008 from RM46.5 billion for this year, which would lead to the budget deficit being unchanged at 3.4 percent or slightly more than that.
"There's some room for us to actually pump prime a little bit more for this round, but going forward, I expect the government to consolidate the budget and probably turnaround to achieve a balanced budget by 2010," he said.
The Budget deficit is targeted at 3.4 percent in 2007.
Yong Poh Chye said that if the government maintains efforts to reduce the deficit, "they may just equal the 3.4 percent or reduce it to 3.3 percent at most."
Anthony said the government would continue announcing incentives to maintain the nation's competitiveness and "I believe they will come out with some measures to ensure the economy is resilient to external risks."
For the current year, he expects exports to remain weak and bring down the growth rates to 5.8 percent as opposed to the official target of six percent.
"The bulk of the growth in 2007 will come from domestic sectors and the trend is expected to remain in 2008," he said.
"I am more bullish about next year. I'm looking at about a 6.1 percent Gross Domestic Product growth for next year, provided the external factors hold up well and the country is well supported by domestic activities," he said.
However, Veerinderjeet believed otherwise, saying the country was well on track to achieve a six percent growth rate for 2007, but next year the rates could come off slightly.
Yong Poh Chye concurred that growth in 2008 would ease slightly to about 5.6 percent due to higher petrol prices coupled with inflationary pressures due to civil servants' pay hike as well as bonuses likely to be announced in the budget which would bring down actual disposable income.
-- BERNAMA |
