KUALA LUMPUR, Oct 21 — Malaysia’s chronic deficit is set to worsen despite the government’s plan to trim its chronic overspending, according to a survey that found negativity surrounding Putrajaya and the economy.
In the Financial Times’ Confidential Research by its research arm, Putrajaya could miss its own deficit target by as much as 0.6 percentage points despite implementing the Goods and Services Tax (GST) in April.
“The reforms include cutting the fiscal deficit to 3.4 per cent of GDP last year from about 6.7 per cent in 2009,” FT said today, referring to the prime minister earlier reform plans.
“Yet FT Confidential Research reckons the deficit will rise to between 3.6 and 3.8 per cent this year, in contrast to the official projection of 3.2 per cent published in January,” it added.
The 3.2 per cent deficit target was also raised from the original 3.0 per cent for 2015, following a crash in global oil prices that forced Putrajaya to revise this year’s Budget just two months after it was passed.
The diversification of the economy via the GST, FT noted, could not offset the ailing oil and gas industry which has seen a 40 per cent decline in petroleum royalties and tax.
The research arm also pointed out that while sentiment for the Najib administration has improved slightly this quarter, Malaysians still view the government negatively especially following the allegations of personal graft against the prime minister and “irregularities” with the 1Malaysia Development Berhad (1MDB).
The FT Confidential Research categorised public sentiment in the government and the economy as “badly depressed”, which it said was moving the administration to increase populist measures in order to counter the negativity.
“The government has already said it will expand an annual cash transfer programme for poor households next year, from the RM5 billion allocated this year.
“It is also investing more in rural infrastructure. One example is construction of the toll-free Pan-Borneo Highway, finally under way after years of delays,” it said.
The London-based business paper the cautioned against prioritising policies to boost political support over unpopular but necessary reforms, especially after the three main credit rating agencies ranked Malaysia just “four notches above non-investment grade or junk.”
Prime Minister Datuk Seri Najib Razak is set to table the Budget for 2016 this Friday.
Putrajaya raised toll rates at highways operated by 11 concessionaires last week, in a move economists say was to free up resources for “people-friendly” measures in Budget 2016 amid slowing economic growth.
