The Ministry of Finance (MOF) said Gross Domestic Product (GDP) growth is expected to expand at a steady pace of between five per cent and six per cent in 2015 given the better global economic outlook and underpinned by the 2015 Budget measures.

However, there remains downside risk on the external front, including slow and uneven growth in the euro area, increased deflationary pressures in the advanced economies, slower growth in emerging markets, as well as, geopolitical tensions, MOF said in its 2014-2015 Economic Report.

The report is issued in conjunction with the tabling of the 2015 Budget in Parliament today by Prime Minister Datuk Seri Najib Tun Razak, who is also the Finance Minister.

On the demand side, MOF said growth would be private sector driven, building on the success of initiatives taken by the government over the years to provide a conducive environment for private economy to thrive.

The Treasury said private investment would remain vibrant and was expected to register double-digit growth supported by the ongoing implementation of the 10th Malaysia Plan, Economic Transformation Programme (ETP) and Government Transformation Programme (GTP).

The ETP has generated significant investment since its launch in 2010, garnering total committed investment of RM219.3 billion from 196 projects.

These projects are expected to contribute RM144 billion to Gross National Income (GNI) and create 437,816 new jobs.

On the supply side, all sectors are expected to expand with manufacturing and services remaining the drivers of growth, supported by sustained domestic economy activity, higher export oriented manufacturing activities and trade-related services.

Malaysia’s external position is also expected to remain strong in line with improved prospects for global growth and trade while the current account is expected to remain in surplus in 2015.  

MOF said fiscal policy in 2015 would continue to focus on improving the financial position of the government while supportive of economic growth and reform initiatives.

With revenue growth surpassing that of expenditure, the deficit in 2015 is anticipated to further decline to three per cent of GDP.  

The total Federal government expenditure would continue to be stable at RM271.9 billion while revenue is estimated to be higher at RM235.2 billion.

The government remains committed to pursuing a sound fiscal policy and has adopted a multi-pronged approach towards achieving a balanced budget by 2020.

These include the implementation of the Goods and Services Tax (GST), accrual accounting and Outcome-Based Budgeting (OBB) as well as the adoption of a more targeted fuel subsidy mechanism.

Meanwhile, the government would also ensure debt is capped below 55 per cent of GDP while ensuring revenue would be sufficient to meet operating expenditure.

Greater inter-agency cooperation would continue to be promoted in the implementation of programmes to avoid wastage and duplication as well as optimising the use of public assets.

Inflation, on the other hand, is expected to remain manageable, despite trending above the long-term average, partly due to the implementation of GST and the spillover effect of the recent fuel subsidy rationalisation this month.

However, with external prices expected to be subdued, the effect of GST on inflation would be transitory and is anticipated to return to normal growth in 2016 as domestic cost factors wane.

The report also touched on the Eleventh Malaysia Plan (11MP) which would be tabled in 2015 to accelerate the transformation to an advanced nation status.

The five-year plan is expected to focus on further strengthening growth, particularly in services and manufacturing, harnessing human capital, promoting entrepreneurship, enhancing environmental management, improving rakyat well-being and enhancing exclusiveness.

The 11MP would also promote greater dynamism of the private sector, especially small and medium enterprises to boost their contribution to the economy, MOF added. — Bernama