PETALING JAYA, May 17 — Malaysia should not be worried about any potential downgrade in credit rating due to the implementation of the zero-rated Goods and Services Tax (GST), as the country is set to profit from higher oil prices and lower government expenditure, Prime Minister Tun Dr Mahathir Mohamad said.
“(This) the (2018) budget was drawn up when the oil price was at US$52, (but) now (at) US$70 per barrel, we stand to profit from this,” he told a press conference after chairing the Pakatan Harapan Presidential Council meeting here today.
Dr Mahathir said the off-setting revenue mechanism had been taken into account when the government decided to lower the GST rate from six per cent to a zero-rated tax.
He also said the fluctuations in oil prices, which would impact government revenue, had also been factored in when deciding to reintroduce the subsidies for petroleum.
“Of course, what we have decided is that there will be no more changes or fluctuations in the value of petroleum, which has been changed every week.
“This is destructive to business, both the buyers and sellers, so now the price will remain static, but if we have to subsidise, then we will subsidise,” he added.
International rating agencies — S&P Global Ratings, Moody’s Investors Service and Fitch Ratings — said the zero-rated GST would constraint government income should there be no revenue-raising measures.
Asked on the gross domestic product (GDP) growth outlook for this year, Dr Mahathir said the government had no projection at present, as it was still reviewing the pertinent figures that would determine the real economic condition.
“Regarding the figures and the country's financial position, I realise that many of the figures are false.
"We need to determine to what extent they are not truthful (before making any projection),” he explained.
In March, Bank Negara Malaysia (BNM) raised its forecast for Malaysia's economic growth this year to 5.5-6.0 per cent from 5.0-5.5 per cent previously. Last month, the World Bank similarly lifted its GDP growth forecast for the country to 5.4 per cent from 5.2 per cent previously.
BNM today announced that the GDP grew by 5.4 per cent in the first quarter of the year. — Bernama