Economists warn Malaysians to brace themselves for higher costs of living and aggressive price hikes in 2014, as a result of government measures to address a national fiscal deficit.
1.Budget 2014
The national budget for 2014 is structured toward resolving Malaysia’s growing debt problems. As announced by Prime Minister Datuk Seri Najib Tun Razak, the government will start implementing drastic measures to alleviate investor concerns and promote economic growth and transformation. “The Malaysian economy must remain resilient in order to lay the foundation for future growth and prosperity,” he said.
Highlights of this year’s budget plans include:
Cash handouts to low-income households to be raised from RM500 to RM650. Households with a monthly income of RM3,000 and below are eligible for cash incentives from the government.
Allocation of RM4.6 billion for various cash schemes expected to benefit 7.9 million citizens. Allocation of RM578 million for the construction of low-cost flats consisting of almost 16,500 housing units. The National Housing Department will facilitate the low-cost housing project. A proposal to offer a special tax relief of RM2,000 to taxpayers who earned up to RM 8,000 monthly in 2013.
2.Subsidies
A higher cost of living, brought about by the ‘gradual restructuring’ of the government’s subsidy programme, is something that Malaysians should ultimately prepare for. According to CIMB chief economist Lee Heng Guie, a cutback in fuel subsidies – along with the abolition of sugar subsidies – will result in likely price hikes. What the government is able to save from the restructuring program will be reallocated – in cash – to development projects.
3.Electricity costs
Effective January 2014, electricity prices are also expected to soar along with those of oil, gas, and coal. The government plans to ration subsidies in line with its goal to become a high-income nation by 2020. Almost 30 per cent of the domestic population, or 1.89 million Malaysian consumers, will be directly affected by electricity price hikes.
4.Fuel Prices
Fuel prices will keep increasing this year, again as a result of the government’s subsidy rationalisation program meant to address the fiscal deficit. As petroleum products are among the nation’s most heavily subsidised, the restructuring of subsidies is expected to trigger constant fuel price hikes.
5.Inflation
Inflation will spike by up to 2.8 per cent in 2014, parallel to rising prices of consumer goods, according to economists. The increase will mostly impact alcoholic beverages and tobacco goods.
6.GDP Growth
The government is expecting the national GDP growth to reach five to 5.5 per cent in 2014. Economists gave a more modest figure in light of Malaysia’s fiscal deficit burdens. They project a GDP growth of roughly 4.5 per cent this year.
7.Average Salary
Workers can relax a bit despite projected price increases because the average salary of Malaysian employees is expected to increase 5.7 per cent this year, higher than the increase of 5.3 per cent in 2013. The growth outlook for local businesses also remains positive.
8.Unemployment
The job market is also taking on a positive trend. In November, there was a reported gain of around 203,000 net additions to payrolls – a clear sign that the job sector is picking up. Unemployment is estimated to fall to about 6.5 per cent in 2014.
9.Housing
More Malaysians will be able to afford their own homes, thanks to government housing programmes aimed at the construction of low-cost housing units. For 2014, plans to build an estimated 223,000 new housing units have been set in motion, carried out in cooperation with the private sector. The National Housing Department will be allocated RM578 million for building additional low-cost flats.
10.Islamic Finance
To finance sustainable and socially responsible initiatives in 2014, the Securities Commission will introduce a model for social responsible investment (SRI) sukuk or Islamic bonds.
11.Internet Accessibility
The government will continue with a national scale high-speed broadband project, which involves a RM1.8-billion investment. State-backed Telekom Malaysia Bhd and the private sector is set to work together to provide better broadband accessibility to rural and suburban areas.
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