Malaysia Budget 2016 “realistic” but fiscal discipline, structural reforms critical to growth

With the Malaysia Budget 2016 announced on Friday, industry captains and experts have shared their views to the measures the government will be implementing over the course of the coming year, in the face of tough macro-economic conditions. DEALSTREETASIA brings to you a compilation of Budget reactions from Malaysia’s top industry leaders in banking, finance and real estate.

Banking and Finance

CIMB Group chief executive officer Zafrul Aziz said, the Budget 2016 is realistic, and “moderately expansionary” as the government continued its agenda of balancing capital and people needs against a challenging external and domestic economic backdrop.

“With the decline in oil revenue, the government must continue with the right economic structural reforms and ensure the well-being of the people,” he said, in a statement, noting that the targeted spending plan and proposed fiscal measures detailed in the Budget 2016 are expected to provide additional measures to support domestic demand and the overall well-being of the people.

He added that the macroeconomic assumptions of Budget 2016 are realistic, and therefore achievable.

“The Malaysian economy is projected to post more moderate growth in 2016 than 2015 but highly respectable with GDP growth projected at the 4-5 per cent range. Exports are seen picking up in 2016, though imports will also rise in line with a projected improved performance in investment. Trade and current account surpluses, however, will narrow in 2016, and inflation is seen little changed in year-average terms.”

Maybank group president and chief executive officer Abdul Farid Alias commented that the budget was a relatively defensive one, and that there was not much for the financial services and banking industry.

“All in all, it is a relatively defensive budget, and one that is required to deal with the challenges that we are facing,” Alias said in a statement.

“Because we don’t have much room to play, it is important that every Malaysian Ringgit we spend must be allocated efficiently, and spent effectively for results,” he added.

Although there was not much announced for the financial services and banking industry, Alias said the banking group looks forward to more initiatives for the sector that the prime minister promised in his budget speech today.

He also addressed the need for the government has to stay committed to budgetary discipline.

“It is absolutely critical to ensure the country’s current investment grade sovereign credit rating and the accompanying ‘stable’ outlook can be sustained to avoid further negative impact on sentiments,” he said.

Franklin Templeton Investments executive director and head Malaysia fixed income & sukuk (Islamic bond), Hanifah Hashim commented that the the Malaysian economy remains healthy in comparison to its global peers – that although the country’s debt has risen following a deceleration in growth and a thinner current account surplus, it has held steady on the back of the rapid fall in the price of oil when compared to emerging market peers.

“But the market still views the Malaysian economy cautiously, as negative news floods the domestic front and continues to drive down sentiment and obscure rational analysis of the country’s economic position,” she noted.

“Malaysia continues to be viewed through a prism of being a commodity exporter, primarily oil, which is why the country has been indiscriminately affected by the fall in crude oil price. In fact the country has a well-balanced export composition: although commodity exports have been declining, electronics exports have been rising. This is key, as electronic exports are likely to be supported by the strengthening US economy,” she explained.

From a macroeconomic standpoint, Hashim commended the government’s fiscal discipline in narrowing the deficit from 7 per cent in 2009 to 3.5 per cent in 2014. The government continues to make progress by implementing prudent economic policy reforms such as the removal of the fuel subsidy, implementation of the Goods and Services Tax (GST) and other spending cuts to achieve the deficit target of 3.2 per cent of gross domestic product by end-2015 and to reduce it further to 3.1 per cent in 2016, as announced during the budget.

Real Estate and Development

Property development and management consultancy CH Willams Talhar & Wong managing director Foo Gee Jen noted that while the government had emphasized on Budget 2016 being a balanced budget to buttress investor confidence in the government’s financial stability, there was less funding for development expenditure (about MYR50 billion out of a total budget of MYR267 billion).

Foo added that while more tax deductions were provided to low income families, taxes have been increased for upper income households, contrary to the government’s earlier promises of reduced personal income taxes in the light of the introduction of GST.

For the development of the Malaysia Vision Valley, Cyberjaya City Centre and Aeropolis KLIA, the consultancy said the support should see accelerated growth in the south of Kuala Lumpur.

“Malaysia Vision Valley from Nilai to Port Dickson could be the next region of growth provided that highway and rail access are improved. Cyberjaya’s popularity as a commercial and residential address will be further increased with the proposed 141 acres Cyberjaya City Centre. Initially Aeropolis KLIA will see 1,300 acres developed into a new urban centre,” Foo said in a statement.

Additionally, he also commented on the growth in tourist arrivals in 2016, which should be maintained on an upward 2016 with the introduction of the E-Visa for visitors from China, India, Myanmar, Nepal, Sri Lanka, US and Canada.

“By 2016, it is targeted to have 30.5 million tourists with MYR103 billion receipts as well as the 100 percent tax exemption (financial years 2016 to 2018) for tourism related business operators. GST exemption in domestic economy class flights will also improve connectivity within intercity travel in East Malaysia and indirectly boost domestic tourism.”

Also read:

Malaysia Budget 2016 bats for domestic investments, sops for capital markets & SMEs to drive growth

Malaysia Budget 2016: Khazanah to invest $1.7b in high-impact projects & VC/PE fund

Malaysia aims to boost Islamic finance with new initiatives in budget

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.