Malaysian Prime Minister Anwar Ibrahim pledged to balance fiscal responsibility with protecting livelihoods amid a challenging economy, as he presented a revised 2023 budget that allows for more spending while still further narrowing the fiscal gap.
(Bloomberg) — Malaysian Prime Minister Anwar Ibrahim pledged to balance fiscal responsibility with protecting livelihoods amid a challenging economy, as he presented a revised 2023 budget that allows for more spending while still further narrowing the fiscal gap.
The government will spend a total 386.1 billion ringgit ($87.1 billion) this year, according to the Finance Ministry, about 14 billion ringgit more than what the previous administration had budgeted. The fiscal deficit will also be smaller at 5% of gross domestic product, in line with Bloomberg’s survey amid expectations of higher tax collection.
“The government remains steadfast in balancing the need to safeguard the well-being of the people and the nation while ensuring a sound and sustainable fiscal position,” Anwar, who also holds the finance ministry portfolio in his government, said in a report released alongside the budget.
Anwar is looking to boost fiscal resilience as a safeguard against threats from a dimming global economy. He has to address credit rating companies’ concerns without upsetting the public ahead of local polls due this year. The prime minister rose to power through the support of rival blocs after no clear winner emerged from the Nov. 19 general election. His approval ratings, while positive, trail that of his predecessors during their first few months in office.
The government is beefing up development expenditure this year, setting aside 97 billion ringgit for the economy, social services and security sector. That’s about 35% higher than last year’s spending, and 2 billion ringgit more than what the previous government had committed for 2023. Transportation alone will be allocated 17.6 billion ringgit, mainly for the construction of roads and highways as well as upgrading existing infrastructure.
At the same time, operational expenditure is revised higher to account for increased spending on retirement as well as subsidies and social assistance. The government will see a “gradual shift” toward a more targeted subsidy mechanism, while continuing to provide cash assistance to the lower income group, according to the report.
Anwar is counting on increased tax revenue as well as dividend from state oil company Petroliam Nasional Bhd. to help bolster government finances and narrow the bigger budget’s fiscal deficit. Malaysia expects direct tax collection alone to rise 6.9% from a year ago, primarily from companies and individual income tax.
Overall, revenue is seen declining 1% from a year ago on lower crude oil prices — a smaller decrease than that projected by the previous government.
To be sure, the budget Anwar proposed Friday is still 2.3% smaller than what Malaysia ultimately spent last year, due mainly to a drop in operational spending. The figures reflect the end of pandemic-era aid and the realities of slowing economic growth and lower commodity prices. Gross domestic product is now seen expanding 4.5% in 2023, still within the previous government’s forecast range.
“2023 is expected to be a challenging year. The government will continue to be vigilant of economic headwinds as well as any potential geopolitical conflict in order to devise the appropriate strategies and actions,” Anwar said.
–With assistance from Cynthia Li.
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