The 2016 Budget, which was unveiled in October 2015, has been revised today during a presentation by Prime Minister Datuk Seri Najib Razak
The aim of this revision to Malaysia’s budget for 2016 is to optimise the country’s developmental and operational expenditures in the face of slower economic growth. The revised budget will include precautionary and proactive measures in managing national revenue and expenditures, while ensuring that the well-being of the people remained a priority.
The Malaysian economy is expected to grow 4% to 4.5% this year, down from an earlier forecast of 4% to 5%. The revised estimate is based on assumptions that oil would range US$30 to US$35 a barrel this year, instead of the assumed price of US$48 per barrel during the initial 2016 Budget announcement last year.
In order to tackle the estimated RM11 billion revenue shortfall due to plunging oil prices (Malaysia’s economy relies heavily on oil), it was predicted that the government might reduce spending for education and scholarships, reclassify items previously exempted from the Goods and Services Tax (GST) and allow involuntary options to cut employee contributions to the Employees Provident Fund (EPF). However, only part of the latter seems to be true, as evidenced from the highlights of the announcement today.
The 11 amendments to the 2016 Budget are:
- EPF contributions by employees to be reduced by 3%. This is expected to increase private sector spending by RM8bil.
- Tax relief of up to RM2,000 to those with income RM8,000 a month or lower. Two million taxpayers to benefit.
- To reduce cost of living, Govt to liberalise APs for agricultural products including coffee beans and meats.
- Domestic Trade, Cooperatives and Consumerism Ministry ordered to increase enforcement and action against unethical traders.
- 30% of contributions to the human resource development fund to be utilised for skills training, including those who are unemployed.
- MyBeras programme to be introduced until Dec 2016. Each hardcore poor family will be given 20kg of rice every month.
- The Government will update the management system of foreign workers, with levies clustered into two categories, not including foreign maids.
- Government will exercise prudent spending on supplies and services and to continue with grant rationalisation.
- Development budget to focus on projects and programmes that place the people first, have high multiplier effect and reduce imports.
- Development financial institutions and Government venture capital funds to increase allocations by RM6bil for benefit of start-ups and SMEs.
- GLCs urged to implement initiatives to reduce the income gap between senior management and workers, to be monitored by the Economic Planning Unit.