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Malaysia: SERC projects narrower fiscal deficit of 4.5% to 5.5% in 2023
KUALA LUMPUR (Sept 20): The Socio-Economic Research Centre (SERC) has projected that Malaysia’s fiscal deficit will narrow to between 4.5% and 5.5% of gross domestic product (GDP) in 2023, from an average 6.2% in 2020 to 2022.
Speaking at a media briefing on Tuesday (Sept 20), its executive director Lee Heng Guie said the fiscal deficit is likely to be lower next year since stimulus measures announced to counter the impact of the Covid-19 pandemic on the economy would no longer be required, as the country moves towards the recovery phase.
“Over the last two years, we had a lot of special Covid-19 Bills/funds to support wage subsidies and some other supporting financial incentives, which we don’t need anymore. All these extraordinary items will be taken away. That’s why next year’s budget should be able to see a lower deficit,” Lee explained.
He opined that the Government is on track to meet its 2022 fiscal deficit target of 6% of GDP, partly thanks to an additional RM25 billion in dividends received from state-owned oil and gas company Petroliam Nasional Bhd (Petronas).
In total, Petronas is committed to paying RM50 billion in dividends to the Government this year.
Lee said that the Government’s austerity drive, which aims to achieve 5% savings from the remaining operating allocation for 2022, would also help it to achieve its fiscal deficit target.
On Budget 2023, which is scheduled to be revealed on Oct 7, Lee called for a fiscally responsible budget to rebuild the fiscal buffer against future shocks, given the already huge borrowings and debt that are unsustainable.
Recommendations include a quick enactment of the Fiscal Responsibility Act and enhancing the Government Procurement Act.
SERC also suggests that Budget 2023 tackle subsidy rationalisation based on the principles of needs and income, in addition to switching subsidies from products to households to benefit the needy as they would receive cash handouts.
SERC also recommended that the goods and services tax (GST) be reintroduced, starting with a 4% rate, but that businesses be given a lead time of at least 12 months for planning and preparatory work.
Source: https://www.theedgemarkets.com/article/serc-projects-narrower-fiscal-deficit-45-55-2023