Malaysia Budget Day Musings

To be announced at 3:30 PM Local Time in Parliament

In Malaysia, the budget is expected to be generally  positive driven by the government’s desire to increase economic growth geared at supplementing  the cost of living issues for lower-income households
To maintain a modicum of stability in both the FX and Bond markets, the Malaysian government will tow the line on fiscal prudence with the overall objective to target a total budget deficit to GDP metric below 3% in 2018. And the financial burden of lower oil prices is expected to be offset by from GST receipts.But with improving oil prices, this could be viewed positively in this light.

However, the currency and local bond markets remain prone to risk from the prospects of higher US interests and the soaring USD after the extremely dovish ECB lean sent the USD higher. But on a positive note, with most G-10 central banks turning dovish this too could suggest a return of investment flows. More so given the daunting task that faces the Federal Reserve Board to unwind their balance sheet which suggests the course for US interest rates may not deviate too far for from the current dot plot forecasts.

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