Najib must tread warily on fiscal measures

WHILE Malaysia's growth story remains good, Prime Minister Najib Razak should be careful about pushing through fiscal consolidation too rapidly.

Next year will be a bleak one for Malaysia's middle class, who are already struggling with the cost of living. Almost immediately after the May general election, Mr Najib raised the price of fuel by 10 per cent. Since then, there have been several more hikes. Mr Najib abolished sugar subsidies in his 2014 Budget and promised to introduce a 6 per cent goods and services tax (GST) by April 2015. In his speech, however, he said he would cut subsidies by 17 per cent. That's nowhere near what has been announced, so economists are expecting more fuel price hikes later in 2014.

In early December, the government announced a 15 per cent rise in electricity tariffs that will take effect on Jan 1. Then, last week, the Works Ministry said that tolls on major expressways would be raised between RM0.50 and RM2. That last measure was greeted with such indignation that the ministry has since denied the announcement. It is also worth noting that one of the ruling Barisan Nasional's pledges before the election was a promise to reduce highway toll rates.