Malaysia’s 2018 fiscal deficit target of 2.8 pct achievable – Moody’s
KUALA LUMPUR: International rating agency, Moody’s Investors Service expects Malaysia to achieve its target of reducing the fiscal deficit to 2.8 per cent of gross domestic product (GDP) in 2018 from three per cent this year, given the supportive economic growth and commodity price environment.
The budgeted pace of revenue growth, if achieved, would be the fastest since 2012. Moody’s
In a statement yesterday, it said the government projected the Goods and Services Tax (GST), corporate tax collection and investment income would drive revenue growth of 6.4 per cent year-on-year.
“The budgeted pace of revenue growth, if achieved, would be the fastest since 2012.
“This is driven by a 6.9 per cent year-on-year (versus 6.6 per cent in the previous year) rise in corporate tax collection, which accounts for a third of total revenue,” it said.
Moody’s said GST revenue, which accounted for about a fifth of total revenue, was budgeted to increase 5.5 per cent year-on-year in 2018 compared with a relatively low 0.7 per cent increase in 2017.
However, the 2018 Budget did not lay out concrete policy measures to increase revenue but instead relied on the economy to boost income, the rating agency said.
Consequently, it said revenue, as a proportion of GDP, would continue to decline to 16.6 per cent in 2018 from 16.8 per cent in 2017, making the ratio among the lowest of A-rated sovereigns.
“Meanwhile, total spending is budgeted to rise by 5.4 per cent next year, but as a percentage of GDP, it will fall for the seventh consecutive year, facilitating overall deficit reduction,” said Moody’s.
It said spending that would foster inclusive growth would take priority while development expenditure was budgeted to rise just 0.2 per cent year-on-year and operating expenditure was projected to increase by 6.5 per cent.
Spending is focused on small and medium enterprises, supporting export growth and boosting sectors such as agriculture and tourism, including enhancing transport infrastructure.
“Another thrust area is meeting goals under the National Transformation 2050 programme by providing support to minority segments of society,” it added. — Bernama