-  The Fiscal Policy Committee (FPC) plans to come up with a medium-term fiscal framework to ensure medium- and long-term fiscal sustainability, said Prime Minister Datuk Seri Najib Razak yesterday.

-  FPC, which was set up in June last year, has deliberated on several fiscal measures, including the goods and services tax and subsidy rationalisation.

-  The government is committed to reduce the fiscal deficit to 3.5% this year and achieve a balanced budget by 2020.

-  The government will continue to implement measures to help the lower- and middle-income groups manage the rising cost of living.

-  According to the Prime Minister, the policies should not marginalise any group and that the economy must be more inclusive and equitable.

-  Malaysia’s wages as a percentage of GDP stands at 39.2%, which is lower than that of developed nations, which have an average of 40%.

-  Najib gave his assurance that the issues raised at the meeting will be given due consideration in the tabling of the 2015 Budget on 10 October.

-  Note that the 2015 Budget is crucial since it is the final budget under the 10th Malaysia Plan, which will provide allocations for the remaining projects.

-  Having said that, we adhere that the government remains committed to maintain its fiscal prudence.

-  We are maintaining our view that there will be at least one round of petrol subsidy reduction of 20 sen in 2014. Petrol subsidies will be reduced gradually and eventually left to float according to the market rate.

-  We expect petrol price to rise by 20 sen in June which will lead to approximately RM5.2bil in terms of savings by the government from petrol subsidy in 2014.

-  Inflation wise, a one-time petrol pump price increase of 20 sen in June will potentially raise full-year prices to 3.3% in 2014 vs. 2.1% in 2013. 

Source: AmeSecurities