KUALA LUMPUR: Malaysian Rating Corporation Bhd (MARC) does not expect Malaysia's national budget to be balanced by 2020, based on the current trend.
However, given Malaysia’s pace of economic expansion that is in line with its potential growth, MARC said it does not expect any negative sovereign credit rating actions from international credit rating agencies, unless there is significant deterioration in its fiscal or debt metrics.
In a research report, it said the government debt level, which is subject to the 55 per cent of GDP ceiling, currently stands at about 46.5 per cent of GDP, not 50.9 per cent as is commonly understood.
“MARC thinks the important issues with regard to sovereign rating are the progress being made in reducing debt, the trend of contingent liability and the extent of policy space available in case of a crisis,” it said.
The government foresees the budget deficit slipping marginally lower to 2.8 per cent of GDP in 2018 from an estimated 3.0 per cent of gross domestic product (GDP) in 2017.
“The marginal decline in budget deficits, as anticipated by the government, reflects continuing fiscal consolidation efforts, as well as efforts to maintain economic growth against a backdrop of rising financial market uncertainties and geopolitical concerns,” MARC said.
Meanwhile, the Centre for Public Policy Studies (CPPS) said the Budget 2018 is deemed as significant investment in its assets, ‘the people’, as Malaysia is gearing towards establishing the country that will significantly reduce its dependence on oil revenues.
CPPS noted the emphasis of the budget has been given on human capital development, SME development, start-ups, and promote entrepreneurialism.
It said initiatives would set Malaysia to become a major player on the world stage in terms of business and enabling the in-flow of revenue through more diverse means.
“However, despite the fact that this is an “election budget”, greater prudency and fiscal management is strongly advised for the nation’s long-term sustainability,” it said in a statement.
The Budget 2018 allocated a total of RM280.25 billion, with 84 per cent (RM234 billion) was allocated to operating expenditure with only 16 per cent for development.
“The ratio has become increasingly imbalanced, as the proportion was 72 per cent to 27 per cent in 2010,” it said.
CCPS said the government should approach operating expenditure with care as emoluments will increase unsustainably without reforming the civil service.