Economic Outlook 2020 Highlights

The economy is expected to grow by 4.8% in 2020 from 4.7% in 2019.

Malaysia’s economy estimated at RM2.316 trillion.

* Federal Govt Budget RM297.02bil

* GDP to expand by 4.8% in 2020 from 4.7% in 2019

*Manufacturing growth 4.1% from 4%; construction 3.7% from 1.7%; services 6.2% from 6.1%; agriculture to slow down to 3.4% from 4.3%; mining and quarrying halved to 0.3% from 0.6%.

*Import duties to continue to shrink by 7.3% to RM12.59bil from RM13.59bil.

*Final consumption expenditure (public) to increase by 1.7% to RM179.46bil from RM176.51bil. Private by 9.1% to RM978.43bil from RM896.97bil.

*Brent oil price assumption US$63 in 2019 and US$62 in 2020.

Federal Government Finance

*Revenue to decline by 7.1% to RM244.53bil from RM263.30bil in 2019.

*Operating expenditure to fall by 8.1% to RM241.02bil (RM262.26bil), current balance at RM3.51bil and development expenditure (net) up 4.6% to RM55.23bil.

Fiscal deficit

*2020 deficit target of 3.2% of GDP versus 3% originally announced in the 2019 Budget.

Expenditure

*RM297bil or 18.4% of GDP under the proposed Budget 2020 for operating and development expenditure. Of the RM297bil, total of RM241bil or 81.1% for operating expenditure and RM56bil for development expenditure.

*BSH assistance of RM5bil in 2020.

*Retirement charges up 1.9% to RM27.10bil. Three-quarter of retirement charges comprise monthly pension payments for 874,000 pensioners and beneficiaries.

* RM53.20bil for 4,744 on-going projects and RM2.8bil for 722 new projects.

*RM12.20bil for the public transportation

Revenue

*Govt expects revenue of RM244.5bil, or 15.2% of GDP in 2020. Tax revenue expected to rise to RM189.9bil and non-tax revenue at RM54.6bil.

*Total expenditure RM297bil, or 18.4% of GDP where operating expenditure (OE) is RM241bil and development expenditure (DE) RM56bil.

Tax revenue, reforms

*As at end-2017,62.4% out of the 1,251,190 companies were registered with the Inland Revenue Board of which 7.8% are subjected to tax. Only 16.5% of 15 million workforces pay individual income tax.

*Measures to improve the existing tax system, including reviewing tax incentives, streamlining tax administration and exploring sustainable revenue sources.

*Total trade expected to increase by 1.8% to RM1.895 trillion after declining 1.1% to RM1.862 trillion in 2019.

*Trade balance to contract by 9% at RM133.43bil after 18.4% growth to RM146.59bil in 2019.

* Employment growth 1.9% with labour force at 15.871 million persons and unemployment at 3.3% or 523,800.

Federal Government debt in 2019

* Federal Government debt to increase to RM799.108bil or 52.7% of GDP in 2019 from RM741.049bil or 51.2% of GDP in 2018.

*Domestic debt to account for RM769.86bil or 50.7% of GDP in 2019 of which Malaysian Government Investment issues to account for RM330.30bil (21.8%), Malaysian Government Securities RM404.167bil (26.6%). Offshore borrowing to increase by 2% in 2019 to RM29.24bil from RM21.50bil.

Public sector debt

*Public sector debt as at end-June 2019 was RM1.1 trillion or 72.6% of GDP due to higher Federal Government debt to finance fiscal deficit. The debt includes Federal Govt, state govts, non-financial public corporations and sovereign-guaranteed debt of statutory bodies.

*Federal Govt debt at RM799.10bil or 69.1% of total debt while balance is from NFPCs (24.8%) and statutory bodies (6.1%).

*Statutory bodies’ net debt rose to RM70.1bil issued by LPPSA to finance civil servant housing loans and by National Higher Education Fund Corporation (PTPTN) for education loans.

*Higher NPFCs’ debt at RM286.60bil due to more drawdown for ongoing infrastructure projects – Mass Rapid Transit, extension of Light Rail Transit line, construction of rail tracks and investments in oil and energy sector.

*Govt committed to debt consolidation with targeted debt-to-GDP ratio below 50% in the medium term.

1MDB

*Due to mismanagement and poor governance of 1MDB, the govt had to assume 1MDB’s entire obligations, including debt principal of RM32.20bil.

*As at end-June 2019, the government advanced RM8.90bil to 1MDB for debt servicing.

Bonds

*Foreigners held RM149.127bil of Malaysian Government Securities as at end-June 2019 – the largest holder out of the RM404.167bil outstanding and up from RM146.15bil at end-2018. EPF was second at RM100.19bil; banking institutions at RM90.52bil and insurance companies RM22.55bil.

Foreigners also held RM14.66bil of Malaysian Government Investment Issues at end-June 2019 compared with RM15.89bil at end-2018.

Foreigners held RM1.81bil of Treasury bills at end-June 2019 from RM3.73bil end-2018.

Fiscal Outlook 2020: Tax reforms crucial to nab evaders

Economic Outlook 2020: RM297bil for operating, devt expenditure

Economic Outlook 2020: Fiscal deficit target 3.2% of GDP in 2020