KUALA LUMPUR, July 24 — The Finance Ministry today announced that Malaysia’s fiscal deficit has been brought down 39 per cent to RM21.4 billion in the first five months of this year compared to RM35.0 billion for the same January-May period in 2018.
Its minister Lim Guan Eng added that the government also succeeded in shrinking its current account deficit by some 94 per cent to RM1.1 billion for the same period January-May period this year, from RM17.1 billion for the same timeframe last year.
“Nevertheless the government is mindful of its subsidy bill, and will continue to manage its expenses prudently,” Lim said in a statement today.
He added the successful fiscal consolidation is one of the reasons why international credit agency Fitch Ratings affirmed Malaysia’s sovereign credit rating last Thursday at A- with a stable outlook, echoing Standard & Poor’s ratings on July 3.
“Fiscal discipline was instituted through a combination of tighter controls over operating expenditure in the form of wider application of open competitive tender and implementation of zero-based budgeting.
“Furthermore, revenue and spending measures as outlined in Budget 2019 has enabled the government to improve its financial health,” Lim said.
He added that this has had a positive impact on the government’s finances and allowed for development expenditure to increase by 13 per cent or RM2.4 billion for the January-May period of this year.
Up to RM259.9 billion has been allocated in Budget 2019 for operational purposes this year. From January to May, RM106.5 billion in operational spending was made, or 41 per cent of the total budgeted operating expenditure.
“Based on current fiscal performance the government is positive of achieving its
fiscal deficit target of 3.4 per cent of the GDP, while keeping its 2019 current account balance in surplus.
“If there is no trade war between China and the United States, two of Malaysia’s largest trade partners, the Government would even be confident of achieving the targeted three per cent of GDP fiscal deficit for 2020,” Lim said.
Noting that Malaysia’s growth has been projected by the World Bank to be 4.6 per cent for 2019, Lim said the government remains confident economy will expand sustainably into 2020.
“Malaysia’s GDP growth remains robust despite the external challenges arising from the China-United States trade war.
“In May, the Malaysian industrial production index grew four per cent year-on-year, beating market consensus of 3.5 per cent year-on-year, as compiled by Bloomberg. May 2019 exports grew 2.5 per cent year-on-year, also beating market expectations,” he said.
In relation to this, approved foreign direct investment (FDI) across all sectors for the first quarter (Q1) of 2019 rose to 73.4 per cent to RM29.3 billion, compared to RM16.9 billion a year before.
“Q1 2019 approved FDI growth was driven by a 127 per cent increase in approved manufacturing FDI to RM20.2 billion, from RM8.9 billion last year.
“Vehicle sales for the first 5 months of 2019 have improved by 13 per cent compared to the same period a year ago. Meanwhile, the unemployment rate for May has dropped to 3.3 per cent, from 3.4 per cent in April,” Lim said.