KUALA LUMPUR (Bernama) – Hong Leong Investment Bank Research (HLIB) expects the government to maintain its budget deficit target at three per cent of gross domestic product (GDP).
Prime Minister Datuk Seri Najib Razak said yesterday he would come up with a full statement next week on the reassessment of the current economic condition and the revised Budget in view of the sliding crude oil prices and recent floods that hit the peninsula’s east coast states.
“While a cut in government spending appears inevitable, we view this positively as it finally shows that the government is facing the reality and is willing to share with the market its latest Budget strategy given the sharp plunge in oil prices,” said the research house in a note yesterday.
Overall, HLIB said it believes the government will maintain its budget deficit target at three per cent of GDP and take the opportunity to revise its growth forecast to 4.5-5.5 per cent for 2015 from the 5.0-6.0 per cent forecast previously.
“We keep our GDP growth forecast of 4.8 per cent for 2015,” it said, adding the impact of the floods on the Budget is expected to be minimal.
On top of the original allocation of RM1 billion for flood mitigation, HLIB expects the government to announce an additional allocation of RM1.5 billion (0.6 per cent of the original Budget 2015), comprising RM500 million in cash handouts for flood victims and RM1 billion for reconstruction works.