Maybank

"A balance between fiscal discipline and sustaining growth for the future”

We view Budget 2013 as mildly expansionary yet prudent. Despite the 16th consecutive year of deficit spending, it is capped at MYR40b and 4% of GDP, down from MYR42.3b or 4.5% of GDP estimated for this year, thus staying on track to achieve the target of lowering the gap to 3% by 2015. Crucially, the Government maintains its operating surplus at MYR6.7b (2012E: MYR4.6b) by ensuring its operating expenditure is fully-funded by revenues.

Obviously the Government needs to strike a balance between maintaining fiscal discipline; sustaining and supporting the domestic demand momentum that has been instrumental for the resilience of real GDP growth so far this year amid the continued external uncertainties and volatilities; as well as attending to the rakyat’s well being.

We are encouraged to see that the Budget continues to provide the domestic stimulus in the form of ETP and GTP programmes. The focus on infrastructure projects will provide stimulus not only for large corporates but for SMEs and smaller corporates in other ancillary sectors. Indeed, we are encouraged by the government's push to strengthen SME contribution to economic growth. These measures will certainly back Maybank’s own efforts in growing and supporting the SME segment.

We welcome the various measures to address people’s concerns regarding cost of living, income and affordable housing, such as the 1% personal income tax rate cut for individuals with taxable income of between MYR2,500 and MYR50,000; the increase in income tax relief for children’s higher education to MYR6,000 from MYR4,000; the second round of BR1M; the targeted subsidies, welfare and financial assistances, and discounts. In addressing the issue of rising property prices, the second year of hike in RPGT is a surprise but necessary to curb excessive speculation and complement efforts to increase supply of affordable housing. These efforts include the RM1.9b allocation to build 123,000 affordable housing units under various programmes by PR1MA, SPNB and Jabatan Perumahan Negara; incentives for banks and developers to revive abandoned housing projects; as well as the improvement in the terms and conditions of the My First Home Scheme.

We are also very pleased to note that this Budget continues to provide support to the financial sector development, particularly for the deepening and broadening of the capital market’s instruments and participations through the incentives for the issuance of AgroSukuk and retail bonds / sukuks. We believe this will further boost sukuk issuances in Malaysia consistent with the development of Malaysia International Islamic Financial Centre (MIFC).

In addition, we applaud the mentioning of the tax system review in an indirect reference to the Goods and Services Tax (GST). While the GST is not going to be implemented next year, it is important to present the case for the tax, as well as prepare the people and businesses mentally and operationally for the eventual introduction of GST.

All in all, a good balanced budget for the people, economy and the country