KUALA LUMPUR, April 21 — Malaysia will likely meet this year’s fiscal deficit target of 3.1 per cent of the GDP due to improved oil prices, the Malaysian Institute of Economic Research (MIER) said today.
Oil prices rebounded from close to the psychological level of US$35 (RM136) a barrel the first quarter this year to the US$35-45 range starting March.
MIER said it expected prices to remain around the same throughout 2016, even as global producers continue to pump crude amid a supply glut.
"I think we can meet the 3.1 per cent fiscal deficit target this year with oil price improving," MIER executive director Datuk Dr Zakariah Abdul Rashid told a press briefing here.
The economic research non-profit said the government can bank on improved external performances to meet its fiscal obligation as exports to major economies increased.
MIER expected export to increase closer to 4 per cent for 2016 based on the International Monetary Fund’s (IMF) forecast of improved external demand. The monetary body projected world trade to grow at 3.2 per cent this year, an increase of 0.1 percentage point.
It also said the stabilisation of the ringgit, Asia’s best performing currency this year, would ease Putrajaya’s efforts to rein in spending and keep its fiscal target on track.
The continued slump in global oil price that triggered the ringgit’s plunge forced Prime Minister Datuk Seri Najib Razak to announce a revision of the government’s 2016 budget as his administration aims to cut spending.
But Putrajaya maintained its 2016 fiscal deficit target at 3.1 per cent of the GDP, while it announced a series of restructuring steps expected to save the government RM9 billion.
Najib said he was confident that the target was reachable.
