FARMERS, fishermen, factory workers and low-ranking civil servants are among the folk who will get the most attention in Budget 2018 – the last before the next general election.

Since surveys have shown that economic issues, such as high living costs and stagnant wages, are the top worry among voters, Budget 2018, which will be announced on October 27, is going to be geared towards solving those problems, economists told The Malaysian Insight.

And since the pain of higher food and service prices is most acutely felt by the bottom 40% of Malaysians, they can expect more aid in this budget, they said.

“Top of the list will be tackling the rising cost of living that needs to be addressed by measures, such as larger income transfers under BR1M (1Malaysia People’s Aid Scheme),” said Prof Yeah Kim Leng of Sunway University’s business school.

“(Also) more targeted subsidy programmes for specific disadvantaged groups, such as single-parent families, the elderly and rural and urban poor.”

But middle-income earners will also not be left behind. Economist Lee Heng Guie said the government could announce a reduction in the personal income tax or increased rebates for medical expenses.

“The lowering of personal tax serves to increase disposable income of wage-earners and households, and lift consumer purchasing power,” said Lee, executive director of the Socio-Economic Research Centre (SERC).

Political analyst Hisomuddin Bakar said the budget is an opportunity to make a case on why the ruling Barisan Nasional coalition deserves another term.

The budget is going to be tabled at the end of October, while it is speculated that the elections could be called in the first quarter of next year which is less than six months away.

“Going into the election, BN needs something that will create a ‘wow’ factor that can really capture voters’ imagination. One of the things that can do that, is the budget,” said Hisomuddin of the Ilham Centre.

Growth but no relief

This year, the economy grew at a stronger pace after a slump of two years, said Lee, powered by consumer spending, rebound in private investments, and a strong surge in exports.

“Real GDP (gross domestic product) growth roared back to expand strongly by 5.7% year-on-year in the first half of 2017.”

But consumers are not feeling the effects of this positive news.

The Malaysian Insight has reported on cost-of-living issues which are filled with stories of how goods are becoming more and more unaffordable.

This is despite the fact the consumer price index (CPI), which measures the rate of inflation, came down to 3.7% (August) from 5.1% in March.

“Whether it is a myth or perception, households are not convinced that the prices of goods and services have moderated,” said Lee.

A The Malaysian Insight survey of Deepavali shoppers revealed that many are cutting back on purchases for the festival and this has depressed earnings for traders.

Another survey showed that nine out of 10 Malaysians living in urban areas like the Klang Valley, Johor Baru and George Town anticipate higher cost of living within the next 10 years.

A 2015 Bank Negara study also found that three out of four Malaysians cannot raise RM1,000 in an emergency.

The findings dovetail with an earlier survey by The Malaysian Insight, which found that low-ranking civil servants were unable to save any money each month after spending on their families.

And although Malaysia saw a rise in median monthly household income, the unequal income distribution may render it meaningless to the lower-income group, said economist Hafiz Noor Shams.

Little room to splurge

Although the Najib administration is expected to devote a considerable chunk of the budget to these concerns, economist Dr Rajah Rasiah warns that the government does not have the ability to splurge.

“Oil and gas prices have yet to return to their 2008-10 prices. With less export revenue, it may be difficult to announce a stupendous budget as public debt is high,” said Rajah, who is Professor of International Development at Universiti Malaya.

So instead of announcing new measures, the government is likely to increase allocations to existing ones, said Rajah.

These measures include BR1M, which is expected to be paid out to seven million households and recipients.

Lee said households earning below RM3,000 will see their BR1M increase by RM100 to RM1,300. For those earning between RM3,000 and RM4,000, BR1M will be increased from RM900 to RM1,000.

“The government may (also) offer bonuses to civil servants, raise BR1M payments and target more farmers and fishermen for further support by using existing mechanisms,” said Rajah.

These measures were present in Budget 2017, such as a special allowance for 57,000 fishermen of between RM200 and RM300 per month.

For rubber smallholders, RM250 million was used to buy latex at a minimum “floor” price.

In addition, a special monsoon aid allowance of RM200 per month for November, December and January, was also paid out to 440,000 smallholders and rubber tappers.

Lee said those in the middle-income bracket could also get some attention from the budget in the form of a reduction of personal income tax by 1% to 2%.

Alternatively, the budget could provide more tax reliefs and rebates for medical expenses for chronic diseases, parents’ expenses as well as children’s education.

“At least, medical or healthcare insurance should be exempted from GST.

“If revenue permits, the budget may consider an outright reduction in the corporate tax rate by 1% to 23% for large companies and to 17% for SMEs on the first chargeable income of RM500,000.” – October 16, 2017.