‘Measures within expectations, ahead of election period’
KUALA LUMPUR: International sovereign rating agencies said measures announced in the 2018 Budget were within their expectations, especially ahead of an election period.
Standard & Poor’s said the increase in expenditure spending next year, against a strong economic growth backdrop, supported revenue growth.
Analyst Andrew Wood said there was little surprise that the government appeared intent on capitalising on these trends in an election year.
“The rise in expenditure arrives against a backdrop of buoyant real gross domestic product growth and stabilising commodity prices, which should support revenue growth.
“The government forecasts that the fiscal deficit will continue to decline, suggesting that it remains committed to its fiscal consolidation programme.”
Wood said the developments were broadly in line with expectations and, therefore, had no near-term implications on the sovereign rating.
“The rating continues to benefit from Malaysia’s strong external position and monetary flexibility, which are balanced by relatively weaker but improving public finances.”
Although Budget 2018 continued with the deficit reduction trend, it lacked major fiscal and revenue reforms, said Moody’s Investors Service.
“Expenditure measures are targeted at inclusive growth and highmultiplier spending, similar to what other governments are implementing in response to demands from populations and electorates.”
Analyst Anushka Shah said the full credit implications of the budget would depend on whether the projected increase in revenues was achievable. This was because targets rested primarily on a rise in the Goods and Services Tax collection, which in turn relied on relatively optimistic growth projections. Rupa Damodaran
The government forecasts that the fiscal deficit will continue to decline, suggesting that it remains committed to its fiscal consolidation programme.
ANDREW WOOD
Analyst