This article first appeared in The Edge Financial Daily, on January 29, 2016.

PUTRAJAYA: Malaysia is turning to the rakyat to support its growth as falling global oil prices has forced the government to revise its 2016 budget. The revised budget announced yesterday introduced 11 measures to free up more cash to spur consumption, including tax reliefs and reduced contribution to the pension fund.

This comes at a time when headline inflation is expected to jump higher than last year’s 2.1%, and consumer sentiment is at an all-time low.

Yesterday, Prime Minister Datuk Seri Najib Razak said Budget 2016 needed to be recalibrated to guarantee economic growth and the rakyat’s well-being, following the drastic fall in crude oil prices since the budget was first announced last October.

This, he said, significantly affected Malaysia’s revenue and gross domestic product (GDP) growth. The weakening ringgit has also added to the challenge.

The government is now looking at a 4% to 4.5% GDP growth this year, instead of the 4% to 5% forecast earlier. But it is maintaining this year’s fiscal deficit target at 3.1% of GDP.

Najib said the government will save up to RM9 billion after the adjustments to its development and operating expenditures, and committing to be more prudent in spending.

“The global economy is expected to be more challenging in 2016. Data by the International Monetary Fund indicates that the global economy will grow at a slower pace of 3.6% to 3.4%,” Najib said.

“Meanwhile, world trade is anticipated to moderate from 4.1% to 3.4%, on account of several economies, such as South Africa, the United States, Brazil and China, which are also expected to grow at a slower pace,” he added.

Najib also dismissed concerns that the country could face a possible recession or economic crisis.

“The government has been vigilantly monitoring the situation. We are not in crisis. Indeed, we are taking pre-emptive measures following the changes in the external global economic landscape. This is to ensure that our economy continues to attain respectable and reasonable growth,” he said.

Minister in the Prime Minister’s Department Datuk Seri Abdul Wahid Omar said the government’s new crude oil assumption price of US$30 (RM126.30) to US$35 per barrel is at a conservative level, given that some economists had even forecast an average price of beyond US$40.

The 11 measures meant to boost consumption are:

1) Reducing employees’ contribution to the Employees Provident Fund (EPF) by 3% beginning March 2016 to December 2017 to increase private consumption expenditure by RM8 billion a year. Employers’ contributions remain as they are now.

The EPF said yesterday the reduction will not be compulsory, as contributors can request to keep their salary contribution rate at 11%.

2) Providing a special tax relief of up to RM2,000 to individual taxpayers with a monthly income of RM8,000 or below for year of assessment 2015. Najib said the government will forego RM350 million in revenue, but two million individuals will enjoy tax savings of up to RM475 each.

3) Lightening the rakyat’s cost of daily necessities. Some of the initiatives are to liberalise the control on import quotas or approved permits for eight agriculture produce temporarily to ensure consistent supply; establishing MyFarm Outlets with prices that are up to 20% below market prices; giving RM50 to paddy farmers for every tonne of cleaned paddy to encourage production; and supplying 20kg of rice monthly to hardcore poor households until December 2016.

4) Mandating that houses priced RM300,000 or below are for sale to first-time homebuyers only. The government will also market 100,000 houses built by government agencies and the private sector at House Ownership Expo Roadshows.

5) Thirty per cent of the levy contribution to the Human Resources Development Fund totalling RM200 million will be provided to enhance the competency and skills of employees, including retrenched workers.

6) Enhancing tax collection efficiency and amounts. The government will double compliance and auditing efforts on tax evaders; restructure selling channels of duty-free cigarettes and liquors to reduce leakages, which resulted in revenue losses of nearly RM1 billion; and tighten free-duty treatment on imported vehicles on duty-free islands.

The government will also put up telecommunications spectra for bidding to maximise revenue.

7) Streamlining management of the foreign worker system, whereby the levy will be clustered into two categories only, which excludes a foreign domestic maid category.

The government will implement the Rehiring Programme to provide opportunities for foreign workers without permits to be given valid work permits.

8) Prudent spending, particularly on supplies and services; continuing efforts to rationalise provision of grants to government trust funds, federal statutory bodies and government-linked companies (GLCs); as well as rationalising and restructuring entities, including companies limited by guarantee and statutory bodies.

9) Focusing on rakyat-centric projects and programmes, as well as projects with high multiplier effect and low import content. This will reduce up to RM5 billion in cash flow commitments, without affecting the economy.

10) Development finance institutions and government-owned venture capital funds to increase financing funds by RM6 billion to provide financing to small and medium enterprises and start-ups.

11) Urging GLCs to implement an initiative to narrow the income gap between higher management and employees, with the rest in the private sector urged to follow suit.

Najib also said there will be a visa waiver for China tourists between March 1 and Dec 31, provided that their stays do not exceed 15 days.