PETALING JAYA – Dzulkefly Ahmad believes that Prime Minister Najib Razak has hit the proverbial “reality wall”, with having to present a “feel-good” budget while being constrained over the fiscal missteps of his own doing.

The Amanah stategy director said with Budget 2018 now being the “election budget” that many expect it to be, Najib, who is also finance minister, would need to dish out the goodies in order to win over the people.

“Najib is desperate to ‘reward’ the rakyat for mandating him and need to ‘award’ them even more to ensure a bigger mandate.

“But while he really needs it to be an ‘election budget’ he is rudely reminded by the constrained fiscal space he is faced with and is now forced to excercise greater fiscal prudence,” Dzulkefly said in a statement.

He added that though the GST and income tax collections are expected to surpass or meet targets, the poor management of the economy and country’s finances would see him stifled.

“He is stifled by his own doings and will now be forced to place further stress on the fiscal space, for Budget 2018,” Dzulkefly said.

He added that the World Bank, in its semi-annual review of the region’s developing economies pointed out that not all is well and good for Malaysia, moving into 2018 and 2019.

“The World Bank said that the ‘ongoing adjustments to the rising costs of living amid continued fiscal consolidation and elevated household indebtedness could weigh on the strength of private consumption in Malaysia’.

“It noted that Malaysia’s budget deficit to GDP ratio is expected to grow between 2017 and 2019, but it will not be more than 5%, while government debt is believed to be between 50% and 60% for the same period,” Dzulkefly said.

He warned that the 5% increase in the ratio of GDP to fiscal deficit may seem small, but it would have a “truly disturbing’ impact on the country’s progressive deficit reduction plan in the coming years.

“The World Bank anticipates that Malaysia’s stronger-than-expected growth this year (5.2%), might be ‘a flash in the pan’ or in their words ‘not continue on the same rate next year because of the expected slowdown in the advanced economies and China’.

“So, where does this leave Najib’s budget for next year?” Dzulkefly asked, urging Najib to cut the huge allocation to the Prime Minister’s Department, instead of imposing further cuts to the health and higher education ministries.