Fiscal deficit to reduce to 5.4 pct of GDP in 2021

KUALA LUMPUR: The Federal Government’s fiscal deficit is expected to be reduced to 5.4 per cent of Gross Domestic Product (GDP) in 2021 from six per cent of GDP anticipated in 2020, according to the Finance Ministry (MoF).

The ministry said that during the transitional year of 2021 from crisis to recovery, the government will continue to focus on recovery measures to revitalise the economy, support business activities and protect the well-being of the rakyat.

“Allocations will be channelled towards more targeted programmes and projects with high multiplier impact to ensure value-for-money.

“And the government will continue to invest in public infrastructure projects to support the economy and stimulate growth in these challenging times,” it said in its 2021 Fiscal Outlook and Federal Government Revenue Estimates report released today.

The ministry forecast the Federal Government’s revenue at RM236.9 billion, or 15.1 per cent, of GDP in 2021, while total expenditure is estimated at RM322.5 billion, or 20.5 per cent, of GDP.

“The operating expenditure (OE) is budgeted at RM236.5 billion and development expenditure (DE) at RM69 billion, mainly steered towards accelerating impactful public infrastructure projects such as the Mass Rapid Transit 2 (MRT2), Pan Borneo Highway and National Fiberisarion and Connectivity Plan (NFCP),” it said.

MoF said the remaining RM17 billion is for COVID-19 Fund disbursement and the government will ensure a swift implementation of the economic stimulus packages and recovery plan under the fund.

Touching on the fiscal deficit of six per cent for 2020, the ministry said the deficit increase would be reflected by the pump-priming measures, as well as lower GDP estimate and revenue collection.

“Consequently, excluding debt service charges, the primary balance is estimated to record a higher deficit of 3.6 per cent of GDP in 2020, while the primary deficit is estimated at 2.9 per cent in 2021,” it said.

Nevertheless, MoF said the government is also committed to gradually consolidate its deficit level in the medium term and resume its fiscal consolidation trajectory without disrupting the momentum of economic recovery and long-term development agenda.

On the country’s fiscal position in 2020, the ministry said total revenue is revised to be lower at RM227.3 billion, or 15.8 per cent, of GDP compared to the Budget 2020 estimates at RM244.5 billion.

“The revenue shortfall, anticipated at 20 per cent from the Budget 2020 estimates, will be cushioned by additional dividends and as special contribution from government entities.

“The entities include Petroliam Nasional Bhd (Petronas), Khazanah Nasional Bhd and the Retirement Fund (Incorporated) (KWAP),” it said.

In contrast, MoF said total expenditure is expected to increase by six per cent, or RM17.7 billion, to RM314.7 billion in 2020 compared to initial estimates of RM297 billion.

“This is due to the fiscal stimulus injection of RM38 billion off-set by savings of RM20.3 billion from the revision of existing programmes and projects, as well as the shortfall in spending from Budget 2020 estimates,” it said.

It said in 2020, the OE is estimated to be rationalised by 5.9 per cent to RM226.7 billion from original estimates of RM241 billion, while the DE is expected to decrease by 11 per cent to RM50 billion from Budget 2020 estimates of RM56 billion.

-- BERNAMA