Kenanga Research said the government may tweak up its gross domestic product (GDP) target for 2010 to near seven per cent from six per cent previously during the Budget 2011 announcement tomorrow.

The research house said consumption growth was likely to pick up gradually during the rest of the year, owing to a firmer labour market and relatively better business activities.

'In spite of the expectation that growth would decelerate in 2H10 to around four per cent and 4.5 per cent after the strong growth rebound of 9.5 per cent in 1H10, we reaffirm our view that GDP growth is projected to register a relatively strong turnaround of 6.8 per cent from -1.7 per cent in 2009,' it said in its 2011 Budget Preview here today.

It said the government was also expected to continue to consolidate its balance sheet by focusing on selective reduction in the operating expenditure.

Kenanga said it expected fiscal deficit to narrow further to below six per cent of GDP this year, or well within the government's target of 5.6 per cent of GDP, as a result of subsidy cuts and continued effort to reduce operating expenditure.

'For 2011, the budget deficit is likely to narrow further to about 5.1 per cent of GDP,' it said.

In view of the government's aim to achieve Vision 2010, Kenanga said, it may frontload most of its infrastructure expenditure allocation for the 10th Malaysia Plan (10MP).

'Frontloading this allocation to the early half of the 10MP period will be a signal of the government's will to achieve its goal of becoming a developed nation by 2010.

'Hence, we expect the allocation of development expenditure for the first two years of the 10MP to likely be in excess of RM50 billion,' it said. -- Bernama