KUALA LUMPUR (Oct 27): Nomura Global Markets Research said Budget 2018 supports its view that the Malaysian government remains committed to its fiscal consolidation agenda, despite the upcoming 14th general election (GE14).

The foreign research firm is expecting GE14 to be held sometime between March and May next year.

In a brief note today, Nomura said Malaysia's maintenance of its 2017 fiscal deficit target is consistent with its view of a sharp fiscal tightening in the second half of 2017, with the strong export sector boosting growth and offsetting the fiscal drag.

On the government's target to reduce its fiscal deficit to 2.8% of gross domestic product (GDP) in 2018 after maintaining this year's target of 3%, Nomura said it is also consistent with its 2017 forecast and near its 2018 forecast of 2.7% of GDP.

"This budget assumes GDP growth of 5.2%-5.7% in 2017, which is similar to our 5.5% forecast that is in the middle of this range, and 5%-5.5% in 2018," it added.

Nomura is expecting government spending disbursements being front-loaded to the start of the year in 2018, ahead of the elections, before running tight fiscal policy in the second half to achieve its fiscal deficit target of 2.8% of GDP.

"We continue to expect Prime Minister Datuk Seri Najib Razak and the Barisan Nasional coalition to remain in power after the election which, in our view, implies the government will stay on a path of fiscal consolidation over the medium term that, in turn, should support Malaysia's sovereign credit ratings," it added.