KUALA LUMPUR — Sept. 25, 2018: The government’s spending is not expected to be huge in the current situation as it addresses the fiscal squeeze before stabilising and moving ahead.
According to Asean Business Club president Tan Sri Dr. Munir Majid, this is due to among others, the escalating US-China trade war which has pulled down the growth of the world economy, which affects Malaysia substantially because it is an export-oriented country.
“We have to accept the fact that government spending will not be huge (for economic development) and we are looking at a 4.5 per cent growth in the gross domestic product,” he said on the sidelines of the CIMB Asean Research Institute (CARI) and Asean Business Club’s briefing on the progress, priorities and challenges of the Asean economic community here today.
However, what the country should also do is to think about the fiscal responsibility to be carried out in terms of managing the deficit.
Munir said the government needs to manage its finances, while discovering that what was previously recorded as the country’s deficit may not be the real number.
“For example, if you overstate your revenue, obviously your deficit will be lower… and for the private sector, if this scenario happens we would have an adjustment period whereby you need to make an adjustment to your account.
“I had my own experience when I was in Celcom when we had to make adjustments because certain assets were recognised in the previous year which didn’t exist, so we had to restate the account.
“So in this case, in respect of our own fiscal position, I think we have a situation where we have over recognised revenue and likely if the government spends too much, our fiscal deficit is going to look so much worse than what it was last year and the year before,” he said.
While Malaysia has sources of revenue from the previous Goods and Services Tax, it is not being compensated fully by the reintroduction of the Sales and Services Tax.
“But we are lucky because the price of crude oil has been going up. However, Sabah and Sarawak wants 20 per cent of the royalty… I think that has got to wait,” he remarked. — Bernama