Malaysia’s Budget 2023 signals quicker fiscal consolidation, deficit revised down to 4.9% – Fitch Solutions

KUALA LUMPUR: Malaysia remains on track for fiscal consolidation in the post-pandemic era, with the shortfall in 2023 likely to narrow to 4.9 per cent from 5.3 per cent previously, said Fitch Solutions Country Risk and Industry Research (Fitch Solutions).

In its outlook report for Malaysia published recently, Fitch Solutions said it has revised downward the country’s 2023 budget deficit forecast following the budgeted amount of RM386.1 billion announced by Prime Minister Datuk Seri Anwar Ibrahim on Feb 24.

It noted that the revised budget is more expansionary than the previous RM372.3 billion proposed by former prime minister Datuk Seri Ismail Sabri Yakob in October 2022.

“Overall, we expect revenue as a share of GDP to fall to 15.2 per cent of GDP this year, from 16.5 per cent in the previous fiscal year, and slightly below the government’s forecast of 15.4 per cent of GDP for 2023,” it added.

Fitch Solutions also said it expects expenditure to fall to about 20.1 per cent of GDP in 2023, from 22 per cent in 2022.

“Due to the quicker pace of fiscal consolidation, we now expect total government debt as a share of GDP to reach 60.7 per cent in 2023, compared with our previous forecast of 63.4 per cent.

“While this would mark an increase from the revised estimate of 59.6 per cent of GDP in 2022, the ratio is well below the revised statutory debt limit of 65 per cent.

“These figures are also down from the peak of 63.5 per cent recorded in 2021,” it said. – Bernama