KUALA LUMPUR: Malaysia’s fiscal deficit will likely be more than the recently-targeted 6.0 per cent of gross domestic product (GDP) for 2021.
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Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz said this was in light of the ongoing Covid-19 crisis and dynamic situation the country was facing.
Tengku Zafrul, in a virtual press conference today, said the country’s fiscal was in a challenging position but the government still had enough funds to finance its expenditure.
The Finance Ministry (MoF) would revise the deficit target and GDP for 2021 soon, he added.
“Our deficit has surpassed what we have budgeted when we announced it in Parliament in November last year from 5.4 per cent to 6.0 per cent as we had recently revised,” he said.
Tengku Zafrul said Malaysia’s fiscal was expected to rise in anticipation of the downward revision of the country’s GDP forecast for 2021.
However, he said the government’s current statutory debt level at 58.5 per cent of GDP was still below the 60 per cent limit.
The government, he added, would continue to extend its support to Malaysians and businesses and it would be within “what the government can afford.”
“We cannot borrow freely, there is a limit of 60 per cent. Now we have reached 58.5 per cent. If we need to increase the limit, we need to study it properly. We continue to support wherever we can responsibly. We need to ensure that once we recover, we can have the ability to recover this in the longer term.
“We need to balance between the short-term needs and the long-term success of reviving the economy, which will help all Malaysians,” he said.
Tengku Zafrul cautioned that Malaysia’s GDP would be affected by the closure of many industries from the move to implement total lockdown.
“But, we are still in the preliminary stage. We are calculating the impact and there will be a revision that is required, given the closure of some major economic sectors,” he said.
Tengku Zafrul said the fiscal direct injection of RM5 billion under Pemerkasa+ financial aid package worth RM40 billion announced yesterday would affect the fiscal deficit.
The government had several options to raise funds, he said. This included cutting expenditures, controlling and reprioritising some of its expenditures, while looking at dividend or income from governemnt-linked comapnies (GLCs) or statutory body.
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“That (fiscal injection) will be funded either through savings in expenditure or increase in borrowings. We may look at dividends from our government-linked companies and statutory bodies,” he said.
Tengku Zafrul said the government would need to implement an emergency ordinance to increase the country’s debt-to-GDP ceiling above 60 per cent.
“We will continue to decrease our fiscal deficit during a difficult time. Our target before was 5.6 per cent of fiscal deficit. Dependent on the GDP, if we may have to borrow more to fund the RM5 billion, the deficit will go up further.
“But we are still finalising the figure as we are still in June. We have another RM100 billion for other initiatives and budget that we have not spent,” he said.
He said Malaysia was in a “dynamic” situation that needed to undergo a two-week of total lockdown (Phase One), followed by Phase Two and Three.
“We also have to make the scenario of what we think will be the situation until the end of this year, linking it to the vaccination programme.”
He said expediting the nation’s vaccination programme would be an important agenda for economic recovery.
“This is our exit strategy to expedite the vaccination programme to 150,000 doses of vaccines per day by June from 80,000 doses daily in May.
“The focus is on high density and populated areas with big economic activities such as Selangor, KL, Johor and Penang, which could be done by October instead of by December this year,” he said.
Tengku Zafrul said the government would want to emulate other countries’ successes of having their population vaccinated.
“We would like to do the same as it is one of the keys focus as we put as much as resources as possible to ensure we get a higher level of inoculation for the population.”
Tengku Zafrul said the government would ensure Malaysians’ lives were protected with the main priority on the vaccination as well as the lockdown to flatten the infection curve.
“Based on our forecast, we hope the two weeks (total lockdown) would be adequate to reduce the infection rate. Then we will enter to the second phase, which will allow more economic activities and subsequently, phase three that permits all economic activities while depending on the country’s vaccination progress,” he added.-NST