Budget to boost aggregate demand: RAM

Budget 2012, to be tabled in Parliament on Oct 7, is expected to boost aggregate demand with industrial upgrading and business support expected to remain high, says RAM Holdings Bhd.

RAM said next year's budget was expected to focus on tackling the rising cost of living, especially for the low-to-middle-income segment, and enhance efficiency through market liberalisation, as well as, easing business costs. "The public remains more concerned about the rising cost of living, although statistics seemingly indicate that inflation is at manageable pre-recession levels," it said, adding that food inflation has been rising faster than overall inflation, at around five per cent.

As a result, RAM said wealth distribution to lower income households, such as cash transfers, could be considered by the government in its 2012 Budget proposals. "This programme would certainly be welcomed as it would improve affordability for the lower economic strata while adding a multiplier effect to aggregate demand within the domestic economy," it said in a statement today.

It also said the government was expected to introduce more measures to render business operations more cost-effective while address impediments against conducting business and investments.

"This is anticipated to improve the domestic investment climate and entice more foreign direct investments," it added.

The rating house said the government was also anticipated to enhance its revenue-generating capability next year to finance its socio-economic objectives for the year. "While some revenue components are anticipated to remain stable relative to growth, such as domestic corporate taxes, there may be substantial changes in other income sources next year," RAM added.

It expected excise duties to be increased as the government's financing needs were forecast to heighten next year. -- Bernama