Selangor Journal
A view of Kuala Lumpur’s skyline on May 30, 2023. — Picture by REUTERS

BMI: Malaysia’s fiscal deficit to narrow to 4.3 pct in 2024

KUALA LUMPUR, April 8 — BMI, a Fitch Solutions company, has maintained its forecast that Malaysia’s fiscal deficit will narrow to 4.3 per cent of the gross domestic product (GDP) this year from 5.0 per cent in 2023.

The country’s public finances are expected to remain on a path of consolidation over the coming quarters, driven by a continued broadening of the tax base while the government continues to rein in spending.

“The budget passed in the Dewan Rakyat in November last year marks a positive step towards Malaysia’s medium-term goal of narrowing its budget deficit to 3.5 per cent of the GDP by 2025,” it said in a statement today.

BMI added that the government anticipated a modest 1.5 per cent increase in revenue to RM307.6 billion for 2024.

“We forecast revenue as a share of GDP to fall to 15.2 per cent in 2024, down from 15.9 per cent in 2023,” it said.

Regarding non-tax revenue, the government has forecasted a 13.8 percent year-on-year decrease to RM63.98 billion this year.

BMI said this was due to lower dividend receipts from Petronas and Bank Negara Malaysia, as well as lower proceeds from licenses and permits.

“But we view this as a positive development that falls under the government’s broader plans to widen its tax revenue base while reducing its reliance on petroleum-related revenue,” it said.

In terms of expenditure, the government has allocated RM393.8 billion for Budget 2024, down from the government’s actual expenditure of RM397.1 billion in 2023.

BMI expects policymakers to stick closely to the planned expenditure and attain the goals outlined in the Fiscal Responsibility Act, which the Dewan Rakyat passed on October 11, 2023.

Apart from the medium-term fiscal framework 2024-2026, which targets an average deficit of 3.5 per cent of GDP during this time, the Fiscal Responsibility Act further mandates that the government deficit fall below 3.0 per cent of GDP in the next three to five years.

“If so, we expect more substantial measures to be implemented to achieve these medium-term targets,” BMI said.

It also forecasts total government debt as a share of GDP to dip from 62.0 per cent in 2023 to 61.2 per cent this year.

While Malaysia’s relatively high public debt levels compared to other emerging markets in Asia, the firm believes that fiscal risks remain limited.

— Bernama

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