KUALA LUMPUR, Oct 17 ― Moody's Investors Service said the ongoing budgetary consolidation announced by the Malaysian government in its 2015 Budget support its positive outlook on the sovereign rating.

It said the Malaysian administration's projection of a federal government deficit of 3.0 per cent of gross domestic product (GDP) in 2015, if realised, would mark a sixth consecutive year in narrowing the fiscal gap, following a stimulus-induced peak of 6.7 per cent of GDP in 2009.

“It is also in line with the government's target to balance its books by 2020,” said the rating agency in a statement today.

The budget showed total expenditure declining to 22.8 per cent of GDP in 2015, from 24.7 per cent in the revised budget for 2014, mainly due to cuts to subsidy outlays, the lowest share of current spending since 2010. 

The government also announced measures to cushion the effect of subsidy cuts and the implementation of the Goods and Services Tax (GST) on consumers' purchasing power.

Moody's said the overall effect from measures to cushion subsidy cuts would result in a reduction in the total revenue take to 19.8 per cent of GDP next year from 21.1 per cent this year, even with the introduction of the more efficient GST. 

“Offsetting measures to preserve consumers' purchasing power somewhat blunt the effectiveness of the subsidy reforms and the introduction of the GST because they lead to erosion of revenue,” said Moody's. ― Bernama