SINGAPORE — When Malaysian Prime Minister Najib Razak unveils the much anticipated Budget 2018 on Friday (Oct 27), he is likely to announce measures to secure key vote banks ahead of a general election due next August, experts say.

But, analysts and politicians told TODAY that budget goodies alone will not be able to help Mr Najib’s ruling coalition, Barisan Nasional (BN), to wrest back its two-third parliamentary majority it lost to the opposition since the 2008 general election.

“A people-friendly budget or welfare/handout oriented budget will not be the most important determinant for an election outcome,” said Mr Gan Ping Sieu, the chairman for the Malaysian Chinese Association’s (MCA) Kluang division in Johor. MCA is one of the senior parties in BN.

“Voters also need to judge which political alliance, in comparison, are the safer pair of hands to steer through the nation’s challenging time ahead.”

Both analysts and politicians said cost of living will feature heavily on voters’ minds and Mr Najib’s consideration when he tables Budget 2018 — which carries the theme Shaping The Future — in Parliament on Friday evening.

As such, Mr Najib, who is also the Finance Minister, is likely to focus on increasing cash handouts under the 1Malaysia People’s Aid (BR1M) scheme and expand the number items exempted from the contentious Goods and Services Tax (GST). Middle-income earners may also get tax breaks.

In a research note, OCBC Bank estimated that the allocation for BR1M will rise to RM7.5 billion (S$2.41 billion) from the RM6.8 billion spent in 2017 while Maybank IB Research — the research arm of Maybank Investment Bank — predicts a RM100 increase per recipient.

This year, a total of seven million recipients — single Malaysians earning less than RM2,000 and households earning less than RM4,000 — received BR1M aid of between RM450 and RM1,200.

“His policy will be increasing handouts under BR1M,” said Mr Wong Chen, who heads opposition Parti Keadilan Rakyat’s (PKR) investment and trade bureau.

“(But), he must realise that his strategy of ‘cash is king’ has limited outcome.”

Mr Najib has however hit out at critics who claimed BR1M is an abuse of government funds and that he is using the mechanism as a form of vote-buying.

“It is frankly cruel-hearted for anyone in the opposition to talk of taking away a programme that is designed to help ease the burden of millions,” he wrote in his blog on Tuesday.

“Everything we have done has been for the good of the people. And that includes taking many tough but necessary decisions that were not always popular.”

CHANGE IN GST?

Analysts believe the two largest income blocs in Malaysian society – the bottom 40 percentile (B40) as well as the middle 40 percentile (M40) – who have been affected by high living costs, will likely benefit from the budget.

“To mitigate the rising cost of living, particularly for the low-income households, that has been attributed to the GST, the government may increase the number of items exempted from the tax,” said Dr Yeah Kim Leng, an economics professor in Malaysia’s Sunway University.

“It could also take the wind out of the opposition’s sails by reducing the GST rate by a percentage point to 5 per cent given the slightly higher-than-expected GST revenue collected in 2016.”

Malaysia first imposed a GST of 6 per cent in April 2015. Consumers have felt the pinch, especially with a weakening ringgit, and opposition parties have held anti-GST rallies.

Dr Ong Kian Ming, a Member of Parliament from the opposition Democratic Action Party (DAP), does not think that a cut in the GST rate is on the cards as Mr Najib is seeking to narrow the budget deficit, expected at 3 per cent this year compared with 6 per cent in 2009.

“Addressing cost of living issues is a major challenge post 2013 but I’m not sure what else he can do beyond increasing BR1M payments,” he said.

“It would be difficult, for example, for him to reduce the GST rate to let’s say 4 per cent because the government is now very dependent on GST related revenue.”

Collections from GST increased 17 per cent in the first half of this year to RM19.3 billion, helped by rising private consumption, HSBC Holdings Plc economists Joseph Incalcaterra and Noelan Arbis wrote in a report last week.

CIVIL SERVANTS AMONG THOSE TO BENEFIT

Analysts also believe that the civil service, including the police force and the military, will benefit from Budget 2018.

Malaysia’s 1.6 million public servants have long been one of the most reliable vote banks for Mr Najib’s ruling coalition.

However, as he prepares for polls, he faces warnings that soaring living costs risk eroding that support. Earlier this month, the prime minister told civil servants that they can expect “good news” from Budget 2018.

“I know many of you are waiting for certain announcements. God willing, I will deliver some good news in the Budget. Please be patient,” he told the 5,000 public sector employees at the 15th civil servants’ assembly on Oct 3.

The good news could come in the form of bonuses and enhancements to the cost of living allowance for government employees, said Mr Lee Heng Guie, the executive director of the Socio-Economic Research Centre in Kuala Lumpur.

Mr Najib had already began to woo the key voting bloc of retired military personnel earlier this year. In July, he announced that some 80,000 non-pensionable armed forces veterans older than 60 will receive payouts under BR1M.

Experts say that rural settlers will also stand to benefit from Budget 2018.

This will be on top of a RM1.6 billion package announced in July that will see cash being doled out and debts forgiven for 95,000 small landholders.

Dr Yeah of Sunway University said that the government will likely expand the BR1M programme for settlers.

“The programme is seen as less effective in garnering votes from city dwellers compared to rural constituencies, in part because of the higher living cost in urban areas,” he added.

“Given the importance of rural votes, this programme will likely be expanded with perhaps greater selectivity, that is, bigger allocations for the vulnerable segments such as retires, single parent households, large households and those with disabilities.”

These farmers come under the auspices of the Federal Land Development Authority (Felda) and they make up the majority of voters in 54 out of 222 federal seats.

In the 2013 general election, BN won all but six of these seats.

WHERE DOES THE MONEY COMES FROM?

With goodies aplenty, how then does the Najib government fund Budget 2018?

For starters, state coffers was boosted by crude oil prices, which climbed to a two-year high of US$59.49 per barrel last month.

National oil company Petroliam Nasional Bhd, the single largest contributor to state income, increased its dividend payout by more than a fifth in August to RM16 billion.

Along with the higher GST revenue, the higher earnings will enable Mr Najib to announce a budget deficit of 2.8 per cent of gross domestic product for 2018, versus an expected 3 per cent for this year, said HSBC.

Dr Yeah told TODAY that with Malaysia’s gross domestic product growth projected at 5 to 5.5 per cent next year, a “mildly expansionary budget is possible” to fund the goodies for the upcoming budget.

While Mr Lee of the Socio-Economic Research Centre also noted that Putrajaya does not have issues with funding, he stressed that it is “important for the government not to overspend and to plug ‘leakages’.”

Going forward, while governments worldwide employ budgetary carrots to woo voters, the impact of such perks may be overstated.

“Although bread-and-butter issues generally prevail as the top concern of the majority of voters, it is the trust and confidence on the political party that matters,” Dr Yeah observed.

“This trust and confidence is demonstrated not just by the annual budget but also the competing socio-economic policies, implementation capacity and governance quality that voters have to gauge among the choices.”

Mr Lee said that ultimately, voters will not be swayed solely by budgetary carrots.

“They will consider the question of ‘What can the party offer that can bring the country and Malaysians going forward?’”

Mr Lee’s view is shared by DAP’s Dr Ong.

“For the rural areas, BN’s campaign strategy is clear. Besides focused handouts, BN will continue to demonise (opposition pact) Pakatan Harapan as anti-Malay and anti-Islam,” he said.

“The politics of the rural areas matter more than the budget.” WITH AGENCIES