HIGHER SPENDING EXPECTED IN MALAYSIA'S 1988 BUDGET
Malaysia's recovery from the worst
recession in 20 years should receive a boost on Friday when the
government announces a reflationary budget for calendar 1988
after seven years of austerity, economists said.
    "Our country is walking on one leg now," said Ismail Salleh,
an economist with the Institute of Strategic and International
Studies. "It has to depend on public sector investment for
faster growth if the private sector is not moving."
    Gross domestic product grew one pct in 1986 after shrinking
one pct in 1985. The fiscal year ends December 31.
    The government has said it expects 1987 growth to be under
two pct but some analysts believe it will be nearer three pct
because prices for commodity exports have risen sharply.
Malaysia is a leading exporter of rubber, palm oil, tin and
semiconductors and a major producer of cocoa, timber and oil.
    The government slashed development spending to 9.8 billion
ringgit this year from 14.5 billion in 1986.
    Economists said unemployment is expected to exceed 10 pct
in 1988 against about 9.5 pct this year.
    Local investment also has stagnated, with businessmen
blaming inconsistent economic policies and lack of incentives.
    One businessman said too many politicians give the
impression that Malaysia was unstable.
    "If we can take care of investment confidence, the potential
to recover strongly is great," a banker said.
    Malaysia's 1987 current account is expected to be in the
black with the Central Bank projecting a 500 mln ringgit
surplus compared with last year's 1.2 billion ringgit deficit.
    The government has said its fiscal policies will balance
the budget by 1989. The deficit in 1986 was 952 mln ringgit.
    The government will also repay some of its external debt,
which stood at 51 billion ringgit at the end of 1986.
    Political leaders have said the budget will not hurt
ordinary people as taxes on basic food and other essential
goods are unlikely to change.
    Businessmen said they hope the government also will cut the
corporate tax, now between 45 and 48 pct, to enable Malaysia to
compete for investors with neighbouring states.
 REUTER
