PETALING JAYA: The cessation of lockdowns and other restrictions, as well as the transition into the endemic phase has played a major role in the strong economic recovery of the country last year, bringing about a commendable growth in government revenue.
However, while recovery was gathering pace, the government still needed to increase operating expenditure (OE) because subsidies and social assistance were still necessary as Malaysians focus on recovering from the lockdowns in 2022 without the concerns of any movement controls being implemented.
Understandably, with the government having to plug the hole elsewhere, development expenditure (DE) took a backseat and dropped marginally last year following the re-prioritisation and implementation progress of programmes and projects.
Overall, Malaysia has outperformed many countries in 2022 economically primarily on the back of pent-up and robust domestic demand, but as global macroeconomic uncertainties continue to linger this year, the government’s focus remains on addressing economic risks to the country as well as on the general well being of Malaysians.
The challenge the unity government is facing is to strike a balance between the quest to keep up growth momentum and to control inflationary pressures, while on the other hand continuing a prudent management of its coffers.
It is clear that the government is expecting revenue to edge down following the cautious outlook on the global economy which is anticipated to also affect Malaysia. Hence, to maintain fiscal shrewdness, expenditure would also need to be reduced.
Interestingly, in contrast to 2022, the government is planning to reduce OE this year due to the expiry of certain social assistance programmes as well as the implementation of targeted subsidy mechanisms; while DE would be increased as development projects resume upon the full return of normality.
Nevertheless, the Anwar administration would continue to keep its finger on the country’s fiscal pulse, maintaining its well-documented focus of lowering its debt to GDP ratio for better sustainability, in order to move the country towards high-income status.
