KUALA LUMPUR: The Pakatan Harapan government is expected to trim allocations for both operating and development expenditure amid lower revenue collections under its inaugural budget to be tabled on November 2.
UOB senior economist Julia Goh said the bank’s base case fiscal deficit projection for 2019 was 3.0 per cent of gross domestic product (GDP).
She said this year’s fiscal deficit was likely to meet the budgeted 2.8 per cent of GDP or RM40.3 billion.
“Measures to restructure the government’s overall debt and pare down the size of contingent liabilities will be ringgit positive,” she said in UOB Malaysia: Budget 2019 Preview note today.
Finance Minister Lim Guan Eng had earlier said that this would be a difficult budget which entails belt tightening measures.
“This infers fewer goodies given the government’s financial position. On a positive note, it should reflect efforts to restore public finances and good governance.
“This will help the country find balance during volatile times, especially to adopt more cost-effective ways of spending and ensure sufficient fiscal buffers are in place,” said Goh.
She said the budget was expected to stay the course of fiscal and debt consolidation.
The size of the budget deficit will depend to a large extent on the Sales and Service Tax (SST) revenues collected, size of refunds for Goods and Service Tax (GST) input tax credits, income tax and RPGT, asset monetisation, oil revenues, and degree of cuts in operating expenditure, Goh said.
Hence, she said the cash aid and fuel subsidies were likely to be reviewed to make it more targeted.
Goh does not expect any adjustments in the corporate and individual income tax rates.
New taxes such as soda or digital economy taxes were possible but bulk of efforts would focus on trimming unproductive spending, she said.
“Given lingering risks on the global front and signs that the domestic economy is moderating, we expect the new government to announce measures to spur investments and growth.
“This includes initiatives to incentivise automation and modernisation, Industry 4.0, and higher valueadded segments. Areas of focus are likely to be affordable housing, automotive, transportation, tourism, e-commerce, and renewable energy,” Goh added.