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BUDGET 2019 was indeed a surprise for us, especially for the community of analysts, after so many anticipations and rumors about Pakatan Harapan's first budget.
It was meant to serve as a backdrop for future economic policy, en route to a high-income country by 2023.
While we were expecting a restrictive budget, it turned out to be another expansive budget. Despite persistent structural problems and ongoing reforms, we are too encouraged by the 2019 budget.
It is commendable work for the government to lead the economy with an expansionary budget, especially when the economy is slowing down sharply under both domestic and global headwinds.
The reforms that took place in the first 100 days of the Pakatan government inevitably resulted in a larger budget deficit. The government has indicated that the budget deficit should rise from 3 percent of GDP to 3.7 percent of GDP in 2018 and to 3.4 percent in 2019.
The 11th Medium Term Plan of Malaysia (11MP) had already planned to reduce the deficit to 3% by 2020 – reflecting the government's total commitment to prudence and consolidation of spending.
The increase of the deficit of 13 RMB in 2018 (to 53.3 RMB against 40.3 RM in 2017) is mainly due to the refunds of additional taxes (4 RM), as well as off-budget commitments and expenses. additional needed (16 RM). offset by the rise in the Petronas dividend (7bill).
In 2019, government revenue is estimated at RMB 261.6 billion, which includes a one-time special dividend of RMB 30 per Petronas. This has dispelled investors' fears about fundraising via a global bond sale.
At the same time, total operating expenses (OE) are estimated at 201.9 billion RMB in 2019.
This is certainly a reassuring news for the market, namely that the government is aware of the costs and is going in the right direction to balance the budget deficit by 2023.
The fact that the government's development spending has remained stable at 201 mbars in 2018-2019 is an important element of the announcement, despite the recent announcement by the government of a 20-mb reduction in development spending for the rest of the year. the period of 11 months.
Continued spending should support growth in the coming years, particularly in a volatile environment resulting from ongoing trade disputes between the United States and China and protectionist policies around the world.
Although the government is optimistic about slightly stronger growth of 4.9%, we would like to remain cautious with a conservative growth target of 4.5%, mainly due to the slowdown in the global environment.
Manokaran Mottain is Chief Economist at Alliance Bank.
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