The government has correctly prioritised fiscal consolidation, restraining expenditure while being prudent with income expectations for 2014.

CIMB Group Group Chief Executive Datuk Seri Nazir Razak said this when referring to the Budget 2014 which was announced yesterday by Prime Minister Datuk Seri Najib Razak.

“The financial markets will welcome the reaffirmation of the targeted 2013 and 2014 budget deficits of 4% and 3.5% respectively for the country's Gross Domestic Product (GDP).

“We compliment the government for showing its resolve by going ahead with less popular measures such as the goods and services tax (GST) and higher Real Property Gains Tax (RPGT) to underpin fiscal consolidation over the medium term,” he said in a media statement.

Nazir said despite the various measures, the Federal Government’s debt is still forecast to rise to 54.8% by the end of 2013 and the country’s current account surplus is expected to narrow further.

“It is imperative therefore that in the near term the government manages its spending meticulously and is agile enough to adjust to unforeseen events in a potentially volatile global economic environment while for the longer term it stays firmly on the path of fiscal consolidation.

“We expect global funds to be ever more discerning between countries based on the financial strength of governments.

“We specifically welcome the government's initiative to improve operations of the derivatives market which will reduce credit risk and cost of hedging for banks and corporate, and incentives to increase savings for retirement by young Malaysians,” he said.

Najib, when tabling the budget yesterday, said the government is committed to ensure that the Federal debt level would remain low and not exceed 55% of the country’s GDP.

Najib said the government was on track in reducing its fiscal deficit from 4.5% of GDP in 2012 to 4% of GDP this year and 3.5% of GDP in 2014.

According to Najib, who is also Finance Minister, Budget 2014 was formulated to ensure that Malaysia’s economy would continue to grow at a healthy pace while its fiscal deficit continue to decline.