KUALA LUMPUR: The government is targeting a three per cent fiscal deficit to the gross domestic product (GDP) by 2020 by improving quality of governance and increasing revenue for the country.
Prime Minister Tun Dr Mahathir Mohamad said the next two years will call for thrifty spending, which could affect economic growth temporarily.
"Thrifty measures for 2018-2020 can affect economic growth but (they) are temporary. I am confident that the eradication of leakages and implementation of the development projects can contribute to the economic growth and well-being of the people,” Dr Mahathir said when tabling the mid-term review of the 11th Malaysia Plan (11MP) in Parliament today.
He said the Malaysian economy was expected to expand between 4.5 and 5.5 per cent per year, supported by domestic and external demand, particularly by the strong demand by Asian countries.
Private demand is expected to spearhead economic growth, with private investments expanding by about 5.7 per cent a year.
“With improved governance and higher revenue, the government is confident the fiscal position can be restored by the end of 2020. The government targets a three per cent fiscal deficit to GDP by 2020,” he said.
He pledged that the country’s economic growth would not be jeopardised despite reduced public spending such as the deferment of the high speed rail project recently.
Dr Mahathir, in presenting the first Malaysia Plan review since the Pakatan Harapan took office on May 9, said the government would no longer be looking at development by size of economic growth or GDP alone.
He noted that in the first two years of the 11MP from 2016, the country's GDP grew 5.1 per cent annually in an inflationary environment at an average rate of 2.9 per cent. This growth was driven by strong private aggregate demand, with private investment and consumption as a driver.
“We see development in terms of increasing people's purchasing power and development needs to be enjoyed by all people or ‘shared prosperity’. This means there is no income gap that is too wide between poor and wealthy between races and tribes.
“Development in the real sense should contribute to the development of Malaysia. Economic growth should continue and evenly requires the non-economic environment to be strong and free from political grip,” he added.