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Malaysia May Revise 2008 Budget Deficit Target

Malaysia may revise its 2008 budget deficit target of 3.1 percent, Second Finance Minister Nor Mohamed Yakcop said on Monday, days after the government announced plans to increase spending.

He didn't say if a revision would be up or down, but analysts say higher government spending to combat rising prices and underpin growth mean they would expect the budget deficit to overshoot its target this year.

Last week, the government pledged to increase its spending by $9 billion to boost rice production and ease poverty as the government seeks to quell public anger over rising prices. It said it would shelve some building projects.

The government did not say how the spending changes would affect the budget deficit, which it had expected to be 3.1 percent of gross domestic product.

But Nor Mohamed told reporters that a revision of the deficit target was possible.

"Initially, the target was 3.1 percent for this year," he told reporters. "But the situation has changed, we need to see, we need to review to get a deficit target that's more realistic."

"There may be a slight change in the deficit." Last year, the fiscal deficit was 3.2 percent of GDP.

Pressure Government

High food and fuel prices have rankled Malaysians, threatening to unleash a popular protest that could break Prime Minister Abdullah Ahmad Badawi's increasingly brittle administration.

The government, which suffered its worst electoral performance in general elections on March 8, also faces a new political crisis.

Malaysia's main opposition leader, Anwar Ibrahim, was holed up in the Turkish embassy on Monday, seeking refuge from sodomy accusations he says were cooked up by the government.

The accusations revive memories of the country's worst political crisis 10 years ago, when Anwar was sacked as deputy prime minister and later jailed for sodomy and corruption.

At that time, Anwar also said the charges against him had been instigated by the government.

The key KLSE Composite index fell 0.7 percent on Monday to its lowest level since March and was down 0.68 percent.

However, Nor Mohamed said he was optimistic that the market would not suffer due to politics.

"At the end of the day, what matters is the economic fundamentals," he said. "Despite the challenges, I am confident we will do very well."