Malaysian Prime Minister Najib Razak yesterday announced increased government spending next year that is clearly steered towards subsidies and social assistance, as he unveiled "the Mother of all Budgets" ahead of tough national elections expected to be called within months.

Everyone from babies to imams, and fishermen to retirees, will get something, as he unveiled a buffet of goodies to reduce widespread grouses about the high cost of living.

To international investors and ratings companies who might worry that his pre-election Budget would abandon financial discipline, he said the fiscal deficit next year will be reduced to 2.8 per cent of gross domestic product, from 3 per cent this year.

"No Budget has ever been crafted as well as this... making this Budget the Mother of all Budgets," said Datuk Seri Najib, who is also Finance Minister.

He presented a RM280.25 billion ($90.4 billion) Budget, up 7.5 per cent from the previous one, and repeated a few times during his two-hour speech that he had "good news" to share.

These included projections of stronger economic growth this year of between 5.2 per cent and 5.7 per cent, up from an earlier forecast of 4.3 per cent to 4.8 per cent.

South-east Asia's third-biggest economy is expected to grow between 5 per cent and 5.5 per cent next year.

"This is a Budget that could potentially help him at the election," said Mr Wan Saiful Wan Jan, senior fellow at ISEAS -Yusof Ishak Institute.

Malaysia's general election is due by August next year but is expected to be called in the next five months.

Yesterday was the ninth time Mr Najib had presented the Budget as Prime Minister and Finance Minister. He went further than in previous Budgets to please voters, with all babies born over the next five years to get RM200 in government unit trusts, while handing out more cash to imams and mosque officials.

Mr Najib promised a whopping sum of RM6.5 billion for rural Malaysians in the agricultural and fishing industry, over three times the sum in the previous Budget.

He said RM500 million would be set aside for a bumiputera microcredit fund that reaches almost 400,000 entrepreneurs.

The lavish gifts are seen as buttressing his bank of Malay and other indigenous voters, who form two-thirds of the country's 32 million population.

But in a surprise move, the government kept unchanged the allocation for the popular cash handout programme called BR1M (Bantuan Rakyat 1Malaysia, or 1Malaysia People's Aid). The government paid out RM6.8 billion to seven million recipients this year, and will pay out a similar amount next year.

He also did not disappoint the middle income, a group that often complains about being ignored by the government.

There will be a reduction of 2 percentage points in personal income tax for those earning between RM20,000 and RM70,000 per annum, putting back RM1.5 billion worth of disposable income into the market.

"This measure will increase the disposable income of the people by RM300 to RM1,000," said Mr Najib, to cheers from his colleagues.

Economists see the government's appeal to middle-income earners as a positive boost to consumer spending.

"The Budget is being expansionary in driving domestic demand through BR1M and the personal income tax cut," said economist Alan Tan of Affin Hwang Investment.

Nomura, in its research note, sees "government spending disbursements being front-loaded to the start of the year (ahead of the polls), before running a tight fiscal policy" in the second half of next year.

Mr Najib was upfront in linking the Budget with securing the vote for his ruling Barisan Nasional coalition. "Let's together ensure a big victory for Barisan Nasional in the 14th general election," he said at the end of his Budget speech.