KUALA LUMPUR: The government is expected to meet its fiscal deficit target of 4.3 per cent for 2024, with a widening tax base and curbs in spending, BMI report said.
The BMI Country Risk & Industry Research report forecasts revenue as a share of gross domestic product (GDP) to fall to 15.2 per cent of GDP in 2024, down from 15.9 per cent in 2023.
This will be from a modest 1.5 per cent increase in revenue to RM307.6 billion, helped by an increase in indirect tax and a 13.8 per cent year-on-year decrease in non-tax revenue to RM63.9 billion (20.8 per cent of total revenue).
"We view this (decrease in non-tax revenue) as a positive development that falls under the government's broader plans to widen its tax revenue base while reducing its reliance on petroleum-related revenue.
Indeed, the share of petroleum-related revenue has fallen from 9.2 per cent of GDP in 2009 to 3.8 per cent in 2023," BMI said.
Meanwhile, expenditure will be cut by 0.8 per cent from RM397.1billion in 2023 to RM393.8 billion in 2024, as laid out in the 2024 budget.
BMI forecasts total government debt as a share of GDP to dip from 62.0 per cent of GDP in 2023 to 61.2 per cent of GDP in 2024.
This will mark a continued decline from the peak of 63.5 per cent recorded in 2021, and remains well-within the revised statutory debt limit of 65 per cent.
"While public debt levels in Malaysia is relatively high among its emerging markerts in Asia peers), we think fiscal risks remain limited.
Total debt levels stood at RM1.147 trillion in 2023, out of which 96.5 per cent were ringgit-denominated securities while the remaining were in US dollars.
Apart from the medium-term fiscal framework 2024-2026 which targets an average deficit of 3.5 per cent of GDP during this time, the Fiscal Responsibility Act passed on Oct 11, 2023 further mandates the government deficit to fall below 3 per cent of GDP in the next three to five years.
"If so, we expect more substantial measures to be implemented to achieve these medium-term targets, BMI said.