A sign for a Petroliam Nasional Bhd (Petronas) gas station stands near the Petronas KLCC Twin Towers in Kuala Lumpur, Malaysia. - Goh Seng Chong/Bloomberg
THE government will continue its counter-cyclical and supportive fiscal policy to propel the socio-economic agenda towards becoming a progressive and successful nation.
The federal government’s revenue collection in 2024 is estimated to increase further to RM307.6bil or 15.6% of gross domestic product (GDP) driven by higher tax collection. Tax revenue continues to be the major contributor and is expected to grow by 6.4% to RM243.6bil, attributed to expansion economic activities, higher company profitability and better employment conditions.
Meanwhile, the non-tax revenue is projected to decrease to RM64bil, mainIy due to lower dividend from PETRONAS, reflecting reduced dependency on petroleum-related revenue.
In addition, several measures will be implemented, which include the introduction of capital gains tax for disposal of unlisted shares by companies and implementation of e-invoicing.The total expenditure is projected to be lower at RM393.8bil or 19.9% of GDP, particularly attributed to the lower financial commitment resulting from the absence of 1MDB bond redemption.
The operating expenditure (OE) allocation is expected to record RM303.8bil or 15.4% of GDP, while the development expenditure (DE) allocation is projected at RM90bil or 4.5%. The government will also undertake the subsidy rationalisation programme in which the savings will be partly channelled to enhance the social safety net programme.
Meanwhile, the 12th Malaysia Plan programmes and projects such as the construction of highways and railways, flood mitigation programme, health facilities and educational institutions will be accelerated to bolster economic activities.
Overall, in line with anticipated higher revenue and lower expenditure, the fiscal deficit level is expected to reduce further to 4.3% of GDP and remain on the consolidation path. This in turn will provide ample fiscal space to cushion against global uncertainties and reduce debt burden in the long term. Consequently, the primary balance is estimated to record a lower deficit of 1.8% of GDP.
In the medium-term, total revenue is projected at RM986.9bil or 15.6% of GDP, mainly contributed by non-petroleum revenue which is forecast at RM816.3bil or 12.9% of GDP. Petroleum-related revenue is estimated at RM170.6bil or 2.7% of GDP.
Meanwhile, the total expenditure indicative ceiling is estimated at RM1,206.2bil or 19.1% of GDP with OE allocation projected at RM927.1bil or 14.7% of GDP, while DE at RM279bil or 4.4% of GDP. Overall, the fiscal deficit is expected to consolidate further with the overall balance averaging at 3.5% of GDP.
Despite moderate economic growth due to external uncertainties and prolonged geopolitical tensions, the government’s fiscal position in 2023 is expected to remain strong. The fiscal stance remains responsive in providing sufficient fiscal support to ensure the rakyat‘s well-being is safeguarded and economic reform continues to be undertaken without jeopardising the fiscal consolidation plan.
However, operating expenditure also increased, particularly emoluments, debt service charges as well as supplies and services.
In addition, the government continues to provide substantial subsidies for petroleum products, electricity and basic necessities to mitigate the rising cost of living especially for vulnerable groups. Concurrently, the government is finalising its targeted subsidy mechanism plan to reduce leakages and wastages.
Meanwhile, the acceleration of programmes and projects post-pandemic has resulted in higher development spending, particularly in the economic sector.
Nevertheless, the fiscal deficit in the first eight months of 2023 improved to record RM46.8bil compared with RM51.9bil in the corresponding period of 2022, attributed to better revenue collection performance, coupled with rigorous expenditure management.
