KUALA LUMPUR: Malaysia’s fiscal deficit is expected to consolidate further in 2023 to 5.0 per cent of gross domestic product (GDP), falling to RM93.94 billion from RM99.48 billion in 2022.
Similarly, the primary deficit is estimated to reduce further to 2.5 per cent of GDP, that is down to RM47.84 billion from RM58.21 billion in 2022, the Ministry of Finance (MoF) said in its "Updates on Economic & Fiscal Outlook and Revenue Estimates 2023” report.
The report said the government’s revenue is expected to be lower at RM291.5 billion, or 15.4 per cent of GDP, compared to RM294.36 billion in 2022, as a result of slower global economic growth and an anticipated moderation of commodity prices.
Total expenditure is estimated to be slightly lower at RM386.1 billion, or 20.4 per cent of GDP, mainly due to the expiry of the COVID-19 Fund and spending optimisation measures, it said.
According to the report, the operating expenditure (OE) allocation is estimated to decrease to RM289.1 billion, primarily due to lower allocation for subsidies following the expected lower crude oil prices and the gradual move towards a more targeted subsidy mechanism.
The development expenditure (DE) allocation is estimated to increase significantly to RM97 billion for programmes and projects under the 12th Malaysia Plan (12MP) involving the construction of highways and public transport infrastructures, health facilities as well as educational institutions.
In addition, a sum of US$3 billion is provided for the redemption of 1 Malaysia Development Bhd (1MDB) bonds.
"In achieving sound public finances and rebuilding fiscal space, the government is committed to continue the fiscal consolidation plan guided by the Medium-Term Fiscal Framework (MTFF), enhance fiscal discipline, and ensure debt sustainability.
"As such, the efforts will be intensified to reduce spending wastages and plug leakages, shifting towards a more targeted subsidy framework and narrowing the regional gap and enhance revenue mobilisation, broaden the tax base and streamline tax reliefs, strengthen fiscal governance as well as improve transparency and fiscal accountability,” the report said.
Nevertheless, the pertinent issue of the rising cost of living, particularly for vulnerable groups, has prompted the government to sustain the magnitude of public spending in the budget and partly to further support growth recovery, it said.
MoF said a more effective and targeted subsidy mechanism would be rolled out on selected essential goods and services.
In line with the Madani aspiration, the MoF said fiscal resources are channelled towards strengthening the social safety net for the people, improving education and learning infrastructure, enhancing the health sector, ensuring food security, boosting impactful investment activity as well as promoting digitalisation and connectivity.
The budget for 2023 was originally tabled by the previous government but could not be passed before Parliament was dissolved. - Bernama
