Fiscal Balance in Malaysia
Malaysia - Fiscal Balance
Malaysia scraps fuel subsidies in push to strengthen fiscal position
The Malaysian government pushed ahead with its subsidy rationalization program by completely removing decades-old fuel subsidies. Starting on 1 December, the retail prices of widely-used RON95 petrol and diesel were fixed on a managed float system that adjusts prices according to market rates. The move is expected to save the government up to USD 6 billion annually, which represents more than 6.5% of the expenditure outlined in the 2015 budget and roughly 1.5% of GDP.
Malaysian Prime Minister Najib Razak embarked on an aggressive subsidy reform agenda in July 2011, introducing progressive cuts to subsidies for products such as fuel, sugar and cooking gas. While the most recent move was facilitated by the drop in global oil prices, it is a big step on the path to reducing the fiscal deficit. Moreover, it comes just a few months before a new 6.0% goods and services tax is introduced in April 2015. With these measures, Najib’s goal is to trim the fiscal deficit from 3.9% of GDP in 2013 to 3.5% this year, 3.0% in 2015, and ultimately position the country for a balanced budget by 2020. Met the why particular Consensus Forecast panelists project a fiscal deficit of 3.5% of GDP in 2014 and 3.1% of GDP in 2015.
Analysts generally consider that the government’s short-term targets are more realistic given the latest subsidy removal, and also expect long-term economic benefits. Reducing the budget deficit now could be crucial if a fiscal stimulus is needed to counteract headwinds in the years to come. Moreover, the decision to remove subsidies signals the government’s intention to channel funds to areas of the economy that can drive growth. Finally, the savings generated will help offset the loss in oil-related export revenues as the price for oil reaches a multi-year low.
Malaysia - Fiscal Balance Data
|Fiscal Balance (% of GDP)||-3.8||-3.4||-3.2||-3.1||-3.0|
5 years of economic forecasts for more than 30 economic indicators.
|Bond Yield||4.23||0.15 %||Jun 14|
|Exchange Rate||3.99||0.0 %||Jun 14|
|Stock Market||1,762||-0.29 %||Jun 14|
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June 5, 2018
The external sector performed well at the start of the second quarter, with year-on-year growth in exports jumping from 16.1% in March to 29.7% in April.
June 4, 2018
Data suggests a cooling of manufacturing activity in the second quarter of the year, with the manufacturing Purchasing Managers’ Index (PMI) dropping for the fourth consecutive month in May.
May 23, 2018
The consumer price index was flat in April, contrasting the 0.33% month-on-month drop in prices recorded in the prior month.
May 18, 2018
Malaysian exports picked up steam in March, growing 16.1% over a year ago (February: +12.0% year-on-year).
May 17, 2018
Growth in the Malaysian economy moderated for a second consecutive quarter in the first quarter of this year.