Malaysia has successfully cut its fiscal deficit by 39% to RM21.4 billion for the first five months of 2019, from a RM35 billion deficit recorded in the same period last year, according to Finance Minister Lim Guan Eng. The current account deficit saw a 94% or RM16 billion reduction to RM1.1 billion for the January-May period of 2019, against a large RM17.1 billion deficit in the same period last year. With that, he said, the government is confident of achieving the fiscal deficit target of 3.4% of gross domestic product (GDP) this year while keeping the current account balance in surplus. He believes that the 3% fiscal deficit target for next year is achievable, if not for the trade war between two of Malaysia’s largest trade partners, China and the US.
“The government is confident that the economy will expand sustainably this year and in 2020. The World Bank projects Malaysia to grow 4.6% for this year, and this is particularly so as Malaysia’s GDP growth remains robust despite the external challenges arising from the China-US trade war,” he said in a statement today.
Meanwhile, the government’s development expenditure has increased 13% or RM2.4 billion for the January-May period as a result of open competitive tenders and zero-based budgeting. Lim said the government is mindful of its subsidy bill and will continue to manage its expenses prudently. He said the successful fiscal consolidation were among the reasons for Fitch Ratings’ affirmation of Malaysia’s sovereign credit rating at “A-” with a stable outlook last Thursday, following S&P Global Ratings’ similar confirmation earlier this month. He said fiscal discipline has been instituted through a combination of tighter controls over operating expenditure in the form of wider application of open competitive tender, and implementation of zero-based budgeting. In addition, revenue and spending measures as outlined in Budget 2019 have enabled the government to improve its financial health. As announced in Budget 2019, the government will spend RM259.9 billion on operational purposes this year. From January till May, the government has spent RM106.5 billion or 41% of the total operating expenditure budget.
- The Sun Daily