Budget: Govt on track to meet fiscal deficit targets

In the 2015 Budget announcement, Prime Minister Prime Minister Datuk Seri Najib Tun Razak said the fiscal deficit was expected to reduce further to 3.5 per cent of the gross domestic product (GDP) in 2014 from 3.9 per cent in 2013.

The fiscal deficit will reduce further to three percent by the end of 2015.

Jeff Ng, a Standard Chartered Economist for Southeast Asia said while the six per cent GST implementation next year would have a one-off impact on inflation, in the long run it would moderate.

He expects the inflation next year at 3.9 per cent before moderating to three per cent in 2016.

The recent fuel subsidy rationalisation that resulted in the price of RON95 and diesel fuel to go up by 20 sen to RM2.30 and RM2.20, respectively, will help reduce the government’s expenditure, he told Bernama.

The prime minister asserted the importance of continuing the deficit reduction measures and achieving a balanced budget by 2020.

However, as a caring government, several goods would be exempted from the GST amounting to RM3.8 billion.

The government has also channelled RM4.9 billion back to the rakyat through various assistance such as the 1Malaysia People's Aid (BR1M).

The challenge is for the government to ensure that its current account does not slip into a deficit while balancing the needs of the rakyat.

This is to ensure financial resilience so that it will not lead to downgrade by international agencies.

Ng said there was a limited risk for the current account to turn into a deficit with exports picking up by the year-end with economic growth gathering pace in the US and China.

He said it was projected that current account surplus would climb to 6.7 per cent of the GDP next year from 6.5 per cent this year, and four per cent in 2013.

Osman Morad, Chief Executive Officer and Managing Director at Standard Chartered Bank Malaysia Bhd, described the inclusion of more items in the GST zero-rated list and an increase in BR1M as a positive move to ease the burden of the lower income group and cushion temporary inflationary effect of the GST.

In addition, electricity consumption will not subjected to the GST from the first 200 units to 300 units and this will benefit 70 per cent of households.