Economic Analysis - Budget 2018: Fiscal Discipline Still Intact Despite Upcoming Elections - JAN 2018
BMI View: Malaysia ' s 2018 budget is a broad-based one that largely succeeds in striking a balance between remaining on the path of fiscal consolidation while preparing the ground for general elections that must be held by August 2018. We believe that strong economic growth will help the government achieve its goals, while the targeted nature of spending will ensure that expenditure remains capped and we forecast the fiscal deficit to come in at 2.8% of GDP in 2018 (from 3.0% of GDP in 2017).
We view Malaysia's 2018 budget that was announced on October 27 as one that has managed to largely strike a balance between assuring foreign investors that the government will remain on a path of fiscal consolidation while distributing election handouts to a considerable proportion of the population in the run up to general elections that must be held by August 2018. In its budget, the ruling Barisan Nasional (BN) coalition retained its commitment to its longer term development objectives while addressing short-term problems that are aimed at broadening its support. We believe that strong economic growth will be positive for government revenues and go a considerable way in enabling the government to reach its fiscal deficit target of 2.8% of GDP in 2018. In addition, the targeted nature of spending will ensure that expenditures remain capped and we forecast the fiscal deficit to come in at 2.8% of GDP in 2018 (from 3.0% of GDP in 2017).
Broad-Based Expenditure Reflects BN's Political Concerns
|Budget Deficit To Continue To Narrow|
|Malaysia - Budget Balance, % Of GDP|
|BMI/Bank Negara Malaysia|