Prime Minister Najib Razak proposed Friday a 232.8 billion ringgit ($73.7 billion) budget for 2012, with plans for housing, infrastructure and rural projects to help the economy expand by as much as 6 percent. Growth is expected at 5-5.5 percent this year, lower than an earlier forecast of up to 6 percent, he said.
The budget targets lower and middle-income groups including some 1.3 million civil servants, with cash handouts, housing and tax rebates.
Najib's ruling National Front coalition, which has been in power since independence from British rule in 1957, aims to regain support in polls expected by mid-2012. It suffered its worst-ever performance in 2008, losing more than one-third of seats in Parliament to Anwar Ibrahim's opposition alliance amid complaints of corruption and racial discrimination.
Najib, who took power in 2009, recently pledged to overhaul controversial security laws and ease other restrictions on civil liberties as part of measures to bolster support.
"What is important is the creation of a brighter future for every Malaysian child, a future full of hope and prosperity, not fear or hatred," he told Parliament.
The 2012 budget allocates 181.6 billion ringgit ($57.5 billion) for operating expenditure and the rest for development spending — which includes poverty reduction programs, educational training, health care and housing.
Najib said federal government revenue is estimated to grow 2 percent to about 187 billion ringgit ($59.2 billion) in 2012. This will help narrow the government's budget deficit to 4.7 percent of gross domestic product from 5.7 percent this year, he said.
Najib said the government would spend 1.8 billion ringgit ($570 million) to give the 53 percent of Malaysian households earning less than 3,000 ringgit ($950) a month a one-off 500 ringgit ($158) cash payment. School fees will be abolished, making education free for all Malaysian children up to 18 years old. Fuel and other subsidies will be maintained at around 33 billion ringgit ($10.5 billion) in 2012, he said.
Najib announced an overhaul of the civil service, with plans to raise the retirement age from 58 to 60 and a new salary structure for higher increment and faster promotion. He said civil servants will receive another half-month bonus, giving them a total one month bonus payment this year.
He said 17 service industries ranging from architecture to engineering and hospital services would be opened up to allow full foreign ownership. To curb property speculation as housing prices soar, he said the government would impose a staggered real property gains tax of up to 10 percent.
"It's a people-friendly budget that could potentially boost the government's popularity. We expect general elections to be called by the first half of next year," said Kung Lung Wu, economist at Credit Suisse in Singapore. However, he said the 2012 growth forecast was too optimistic given the global economic weakness. He predicts 4.8 percent growth.
