Some commentators had forecast a 'populist' budget by the Malaysia Prime Minister Najib ahead of likely elections next year. Hannibal Hanschke, Reuters.

Malaysia’s Prime Minister Najib Razak avoided broad populist measures in his budget announcement on Friday, reassuring markets by pledging to cut the country’s large fiscal deficit and debt burden.

Najib said the total budget for 2017 would be 260.8 billion ringgit (US$62.3 billion), up 3.4 percent from the previous year. He added that the goods and services tax (GST) would not be raised.

“We are now on the right track, as we have and are taking firm, bold and right decisions despite the measures being unpopular,” the prime minister said in parliament. “We have laid strong foundations for the country’s long-term financial and economic position.”

Southeast Asia’s second-largest oil producer and the world’s second-largest exporter of liquefied natural gas was left reeling from the slump in global crude oil prices late last year, forcing it to slash its 2016 budget in January and lower its growth target to 4-4.5 percent.

Najib, however, said the outlook was improving and expects growth to pick up marginally in 2017 to 4-5 percent and the budget deficit to be 3 percent of GDP from a target of 3.1 percent this year.