Malaysia hands out goodies in 2012 budget

KUALA LUMPUR, Oct 7 (Reuters): Malaysia said Friday it planned to boost infrastructure and consumer spending to cushion the impact of the global economic downturn and bolster confidence in the run-up to an expected general election in early 2012. Prime Minister Najib Razak also handed out cash payments to the poor, raised civil servants' pay and opened up 17 service subsectors to foreign investors, with domestic demand targeted to be the key driver of the economy as a possible global recession clouds the outlook. "Global developments would certainly have a direct impact on the Malaysian economy," Najib, who is also Finance Minister, said as he presented the 2012 budget in parliament. "With these developments the government will put in place measures to stimulate domestic economic activities, in particular public and private investments." The government also allocated 2 billion ringgit of infrastructure projects for bumiputras, most of whom are ethnic Malays. It offered tax breaks for Islamic bond issuance, raised civil servant pensions and announced that it would list the global arm of its plantation group FELDA. Najib forecast that the economy would grow 5-6 per cent in 2012, while the fiscal deficit would fall further on the strength of robust domestic demand and commodities exports. Reflecting the downdraft on Asia from the slowdown in the United States and Europe, the government trimmed its 2011 economic growth target to 5.0-5.5 per cent from 5.0-6.0 per cent earlier. Its fiscal deficit will shrink further to 4.7 per cent of gross domestic product next year from 5.4 per cent in 2011 as it reduces development spending, confirming an earlier Reuters report. [ID: Analysts said the 2012 spending plan was tailored to woo voters, particularly the majority ethnic Malays whose support is split between Najib and the opposition. "This a populist budget, he is trying to be popular with everyone, give goodies here and there so everyone won't do too badly," said James Chin, a political analyst at Monash University in Malaysia. "What is surprising is the allocation to bumiputras. This was what Malay rights groups have been clamouring for but it's a smaller allocation as they asked for 30 per cent of the project. He is definitely trying to shore up ethnic Malay support." Najib is widely expected to call for a general election in early 2012, although one isn't due until 2013, to prevent further political fallout from the weakening global economy.