HIGHER SPENDING EXPECTED IN MALAYSIA'S 1988 BUDGET
  Malaysia's recovery from the worst
  recession in 20 years should receive a boost on Friday when the
  government announces a reflationary budget for calendar 1988
  after seven years of austerity, economists said.
      "Our country is walking on one leg now," said Ismail Salleh,
  an economist with the Institute of Strategic and International
  Studies. "It has to depend on public sector investment for
  faster growth if the private sector is not moving."
      Gross domestic product grew one pct in 1986 after shrinking
  one pct in 1985. The fiscal year ends December 31.
      The government has said it expects 1987 growth to be under
  two pct but some analysts believe it will be nearer three pct
  because prices for commodity exports have risen sharply.
  Malaysia is a leading exporter of rubber, palm oil, tin and
  semiconductors and a major producer of cocoa, timber and oil.
      The government slashed development spending to 9.8 billion
  ringgit this year from 14.5 billion in 1986.
      Economists said unemployment is expected to exceed 10 pct
  in 1988 against about 9.5 pct this year.
      Local investment also has stagnated, with businessmen
  blaming inconsistent economic policies and lack of incentives.
      One businessman said too many politicians give the
  impression that Malaysia was unstable.
      "If we can take care of investment confidence, the potential
  to recover strongly is great," a banker said.
      Malaysia's 1987 current account is expected to be in the
  black with the Central Bank projecting a 500 mln ringgit
  surplus compared with last year's 1.2 billion ringgit deficit.
      The government has said its fiscal policies will balance
  the budget by 1989. The deficit in 1986 was 952 mln ringgit.
      The government will also repay some of its external debt,
  which stood at 51 billion ringgit at the end of 1986.
      Political leaders have said the budget will not hurt
  ordinary people as taxes on basic food and other essential
  goods are unlikely to change.
      Businessmen said they hope the government also will cut the
  corporate tax, now between 45 and 48 pct, to enable Malaysia to
  compete for investors with neighbouring states.
  

