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Govt may cut operating expenditure by RM4.4bn: analyst

KUALA LUMPUR, Jan 19 (Bernama) -- Affin Hwang Capital expects the government to cut operating expenditure by RM4.4 billion to RM210.8 billion under its Budget 2016 recalibration from RM215.2 billion budgeted earlier.

The development expenditure could be trimmed by RM1.0 billion to RM49 billion from RM50 billion budgeted earlier, especially in non-priority projects, it said.

However, expenditure for projects such as the Mass Rapid Transit (MRT) and Pan Borneo Highway would likely be carried out as scheduled to sustain the country's economic growth, the investment banking group said in a note today.

The recalibrated budget, which is now being adjusted to reflect the recent sharp fall in oil prices, will be presented on Jan 28 with possible measures to reduce government expenditure to cover its revenue shortfall.

Affin Hwang Capital said the government would likely revise downwards its oil price assumption to US$30 per barrel for 2016, from US$48 per barrel earlier, consistent with the assessment made by Petronas.

"Without any fiscal measures such as cut in operating and development expenditures, Malaysia's budget deficit target will likely increase to 3.6 per cent of gross domestic product (GDP) this year, from the earlier official budget deficit forecast of 3.1 per cent of GDP," it said.

Affin Hwang Capital projected operating surplus to remain substantial at RM9.4 billion in 2016 from the earlier budget projection of RM10.4 billion.

It said the government would likely maintain a budget deficit of RM38.8 billion or 3.1 per cent of GDP as well as its real GDP growth forecast range of between 4.0 and 5.0 per cent.

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