KUALA LUMPUR: Malaysia is on track for fiscal consolidation, with research firm BMI expecting a 4.9 per cent fiscal deficit for 2023, down from 5.6 per cent in 2022.
"Our forecast is slightly above Bloomberg consensus estimate and the government's projection, both of which forecast a deficit of 5.0 per cent. "
"Up till 1H23, federal government's revenue and expenditure have trended closely to the projections stipulated at the start of the year and on this trajectory, we believe that the government is on track to achieve its target," the Fitch Solutions unit said in its note today.
BMI forecasts revenue growth to slow marginally from 16.5 per cent of GDP in 2022 to 15.3 per cent of GDP in 2023, and for expenditure to dip to 20.1 per cent of GDP in 2023, from 22.0 per cent in 2022.
It expects total government debt to reach 60.8 per cent of GDP in 2023.
BMI believes the government's revenue projection is within reach, as it widens the country's revenue base through other forms of taxes and intends to incorporate technology into the collection process to minimise take leakages. For example, taxpayers whose annual sales exceed RM100.0 million will soon need to utilise an e-invoicing service to file their taxes.
"We expect these measures to provide further support to public finances moving forward," it said.
On expenditure projections, BMI said, up to 1H23, total spending reached RM188.6 billion, touching 48.8 per cent of estimated total expenditure in 2023.
According to the Medium-Term Fiscal Framework 2023-2025, the government plans to reduce its fiscal deficit gradually to 3.2 per cent by end-2025, which would take the 2023-2025 average to 4.1 per cent of GDP.