Malaysian Prime Minister Najib Razak returned to power this year with the help of a spending spree that boosted consumption. Now voters could feel the pinch as he tries to appease a different group: rating companies.
Najib’s government raised subsidized fuel prices for the first time since 2010 this month and has said it will delay some infrastructure projects, seeking to contain the budget gap and shore up the current account after Fitch Ratings cut Malaysia’s credit outlook to negative in July. It is also considering a goods and services tax in the 2014 fiscal plan due Oct. 25.
The shift toward austerity could cool the domestic demand and investment that kept Malaysia’s gross domestic product rising an average 6 percent in the three years through 2012. The country joins Asian emerging markets such as Indonesia in confronting slower growth as they deal with the side effects of spurring local consumption, undermining the region’s role as the main driver of global expansion.
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