KUALA LUMPUR – The government has revised the deficit target to 6% from 5.4% of gross domestic product for 2021, having factored in continuing measures from last year’s economic stimulus packages, as well as the Permai and Pemerkasa packages launched in the first quarter of this year.
Consequently, the government’s statutory debt is estimated to increase from 58% in 2020 to 58.5% by end-2021.
“This is still below the statutory limit of 60%, which was approved by Parliament in August 2020. The country's debt profile remains favourable, with more than 90% of government debt denominated in ringgit, supported by ample domestic liquidity and long maturity issuances, which supported funding flexibility,” said the Finance Ministry in a statement after a fiscal policy committee (FPC) meeting chaired by Prime Minister Tan Sri Muhyiddin Yassin today.
Among others, the committee discussed reform initiatives, including the Fiscal Responsibility Act framework as a measure to enhance management, governance and accountability in public finances.
“The government’s current priority is to protect lives from the threat of Covid-19, while also ensuring the country’s economic recovery agenda is on track, underscored by the principles of prudent financial management.
“Enhanced efforts towards fiscal consolidation will be implemented in phases in the medium to long term, when our economy is firmly on its recovery and growth trajectory.
“This strategy will ensure that we meet short-term fiscal requirements, as well as achieve long-term fiscal and economic sustainability by, among others, spurring high-impact quality investments and diversifying our revenue base.
“The government is confident that its fiscal strategy will ensure economic growth prospects remain strong in the medium to long term, to fulfil the country’s development agenda and achieve our Shared Prosperity Vision.”
FPC discussed the government’s current and medium-term fiscal position, as well as public finance reform initiatives.
The committee members include the finance minister, minister in the Prime Minister’s Department in charge of the economy, chief secretary to the government, Treasury secretary-general, Economic Planning Unit director-general and Bank Negara Malaysia governor.
In general, global economy and trade is expected to improve this year, in line with the recovery in advanced economies.
“Notwithstanding, the government remains vigilant about the downside risks due to uncertainties in both the domestic and global economic environment that could affect the country’s economic growth,” said the statement.
“These include the prolonged outbreak of Covid-19 due to new variants that have spread globally; Covid-19 vaccine supply disruption, which may hamper efforts to achieve herd immunity; and, worldwide commodity supply shocks and volatility in the financial markets.”
Despite risk being tilted to the downside due to the implementation of the third movement control order, GDP for 2021 is expected to grow between 6.0% and 7.5%, in line with projections by the International Monetary Fund (6.5%), World Bank (6.0%) and Asian Development Bank (6.0%).
In addition, Malaysia's economic performance will be supported by the growth of its major trading partners, such as Singapore, China and the United States, which expanded by 0.2%, 18.3% and 0.4%, respectively, in the first quarter. – Bernama, May 27, 2021
