Budget 2018: More redistributive than expansionary

• The domestic economy has been resilient over the past two years even as the economy adjusted to a number of challenges including lower oil prices and volatile capital flows. We expect GDP growth to remain favourable in 2017 and 2018 supported by improving global growth which we project at 3.3% for 2017 and 3.5% for 2018, translating into healthier exports growth. Besides, with Budget 2018 focusing on boosting domestic investment and supporting household, we expect the contribution from private expenditure to remain strong. Our GDP projection for 2017 is 5.7% and 2018 is 5.5%.

• In supporting the GDP growth in a more balanced form, Budget 2018 is focusing on stimulating domestic investments. The emphasis continues to be on infrastructure (ECRL, Pan Borneo Highway and High-Speed Rail) and connectivity (broadband networks, ports, double-track railway lines and airports).

• Aside from domestic private investment, there is also a continuous emphasis on SMEs to further boost their contribution to the GDP, projected to reach 41% by 2020, through training programmes and grants as well as SME easy schemes under SME Corp and the syariah-compliant SME Financing Scheme. There is also emphasis in this budget on digital economy which is expected to serve as a platform for SMEs to gain global markets access, making them agile to the fast-changing business environment, participate in global supply chain actively and adopt Industrial Revolution 4.0, the next phase in digitalisation of the manufacturing sector. SMEs are incentivised with attractive financing to tap into Industrial Revolution 4.0 so that they will be able to position themselves for the “Internet of Things” that will help improve their cost production, drive efficiency and support online shopping which is gradually becoming the new normal for Malaysians.

• Digital economy has gained a stronger traction with the establishment of the Digital Free Trade Zone (DFTZ) on 22 March 2017 in Kuala Lumpur to serve as a hub for SMEs to gain global markets access, participate in global supply chain actively and adopt Industrial Revolution 4.0, the next phase in the digitalisation of the manufacturing sector.

• Online shopping which is becoming the new normal for Malaysians could open up opportunities for retail stores to reposition themselves. Also the focus on digital economy will help lay the foundation for TN50 by engaging the younger generation in promoting technology through better internet connectivity. On TN50, there has been emphasis on the National Transformation 2050 (TN50) policy, aimed at engaging the younger generation in technology. This is carried out by developing Science, Technology, Engineering and Mathematics (STEM) centres and improving Computer Science modules, with coding programmes and smart classrooms for 21st century learning for creative and innovative learning. This is to position ourselves in the increasing digital economic world and a potentially cashless society.

Source: AmInvest Research - 27 Oct 2017