Of 2012 Budget & 2012 GDP Growth

At the time of announcing the 2012 budget, our Prime Minister also declared the official GDP growth expectation to remain at 5-6 per cent. Rather than being an economic pundit – of which I am not really qualified - to predict whether the rate is sustainable in the face of current global slowdown, yet there are relevant factors that would have a bearing in this respect. I wish to cite the following points for your ponder:-

·        * New Straits Times (Business Times segment) quoted several economists as being surprised by the official 5-6 per cent growth target, especially with the looming uncertainties in the global economy.  Gan Eng Peng, the head of equities of Hwang DBS Investment Management, opined that GDP growth of 2 to 3 per cent would be more realistic in view of a “recessionary Europe, a very slow US economy and a tight monetary policy in China.”

·         *The budget is said to be welfare-oriented, with large baskets of hand-outs and goodies for the rakyat. It appears to focus on making the rakyat happy. However, I do not see sufficient elaborations on how the RM230.83 billion expenditure will vibrantly drive economic activities that are geared toward achieving the targeted growth rate.

·        * From the looks of the contents, do I feel  it is leaned towards a very soon-to-be general elections? Personally, I am inclined to feel that is so…………are you? Explains why it is a welfare-oriented budget?

·         *With so much money to be spent on hand-outs and goodies, would that be a strain on the Government’s prevailing efforts to curtail budget deficits (i.e debts over GDP growth)? Our Prime Minister said the Government has the monetary resources to provide the hand-outs and goodies, but the question as to what kind of bearing or impact the expenses would have on efforts to reduce the current deficit of 5.4% to 4.7% in 2012 is still pertinent. 

Once again, happy pondering, folks.