KUALA LUMPUR (Sept 25): Hong Leong Investment Bank Bhd says Malaysia's Budget 2020 may include a RM4 billion contingency plan to cushion the nation's economic growth from the prolonged US-China trade tension.
In a note today, Hong Leong said the RM4 billion may include additional development expenditure and tax benefits which could lift the country's fiscal deficit to 3.5% of gross domestic product (GDP).
"As growth is anticipated to be slower, we think a contingency plan amounting to RM4 billion could be in the offing.
"The additional allocation will be used to fund projects with high multiplier effect on the rest of the economy, including construction of infrastructure projects like low and medium-cost homes, public transport (MRT3), extension of housing loan repayment, possible tax cuts to support the economic activity," it said.
Looking back, Hong Leong said that during the 2007-2008 global financial crisis, Malaysia had in November 2008 rolled out an initial RM7 billion stimulus package followed by a second scheme worth RM60 billion, which was introduced in March 2009.
Today, Hong Leong's forecast shows that Malaysia's GDP is expected to grow 4.5% in 2019 from a year earlier versus 2018's 4.7% GDP expansion.
Taking into account the nation's expected slower GDP growth in 2019, Hong Leong anticipates Bank Negara Malaysia (BNM) to cut the overnight policy rate (OPR) to 2.75% this year.
BNM's website shows that there will be one more Monetary Policy Committee (MPC) meeting this year on Nov 5.
At the latest MPC meeting on Sept 12 this year, the central bank said the committee decided to maintain the OPR at 3%.