KUCHING: While analysts project that there will be similar targeted measures during Malaysia's Budget 2018, the budget is not expected to lift consumer sentiment significantly.

In the upcoming 2018 Budget, AmInvestment Bank Bhd (AmInvestment Bank) envisioned the government to continue lending support to the civil servants (1.6 million) and middle and the lower income group or bottom 60 per cent (B60) to sustain consumer spending, which accounts for more than 50 per cent of the economy.

AmInvestment Bank noted that the government previously distributed RM5.9 billion and RM6.8 billion in 2016 and 2017 respectively, through its 1Malaysia People's Aid (BR1M) programme.

It is likely to be sustained, at the very least in the research firm's opinion.

"Apart from that, the government's policy to reduce the employees' contribution to the Employee's Provident Fund (EPF) by three percentage points (ppts) to eight per cent may be extended beyond the effective time frame of end-December 2017.

"In addition, we do not envisage minimum wage to be altered seeing most companies have absorbed higher labour cost while having to combat a shortage of foreign labour as well" AmInvestment Bank said.

That said, the research firm highlighted that among the companies vulnerable to a minimum wage hike are OldTown Bhd, Cocoaland Holdings Bhd and Prolexus Bhd.

It pointed out that for a 10 per cent change in minimum wage, financial year 2018 (FY18) earnings are estimated to be impacted by minus 1.6 per cent, 2.5 per cent and four per cent respectively.

Overall, AmInvestment Bank did not expect the 2018 budget to lift consumer sentiment significantly.

"Diminishing goodwill consumer sentiment brought about by an expected BR1M programme is likely to remain weighed by the rising cost of living, elevated household debt and eroding affordability.

"Malaysian consumers are undergoing the longest period of pessimism in its history" AmInvestment Bank said.

The research firm added that it has been 12 consecutive quarters of pessimism since late 2014, prior to the implementation of the Goods and Services Tax (GST) and the crude oil crash of 2014.

"Notable periods of pessimism were only observed during the Asian Financial Crisis and Global Financial Crisis in 1997 and 2007 respectively.

"Those global financial crises only impacted Malaysian consumers for four to five quarters.”

However, unlike the financial crises, the recovery has been protracted and the research firm expected the status quo to extend in the near future.

While AmInvestment Bank could not rule out a hike in excise duties in the upcoming 2018 Budget, recent alterations to excise duties have fallen outside the budget cycle.

This diminishes the possibility of a hike on tobacco and tobacco products in the upcoming budget, the research firm believed.

"Nevertheless, relatively high excise rates or elevated illicit rates suggest excise duties may be left unchanged" it said.

"Enforcement against illicit trade remains the key focus by authorities.”