“We believe that given the government’s focus on maintaining its budgetary prudence, even though there is a lot of spending to come as a result of electoral promises, I do not believe the fiscal position will deteriorate,” S&P’s senior director (Sovereign and International Public Finance Ratings) Kim Eng Tan said at a media briefing.
Tan noted that the elections has introduced a significant shift in the political make-up of the government. However, investors have come to believe that the government would stay and be relatively stable.
“For the first time since independence, we have a government where Umno does not play the leading role or any role.
“So naturally that creates a significant amount of political uncertainty because people do not know what the new government will come up with, whether it will be stable or whether it will continue the kind of policies that investors generally have been used to over the years.
“I think as a rating agency, we are heartened to see that the government is placing quite an attention on trying to bring the fiscal balance sheet back into (a healthy) position, and we also see the government is quite welcoming of investments by foreign investors.”
S&P economist Vincent Conti expects austerity measures to play a big part in the 2019 Budget announcement next month.
“There will be some challenges in terms of revenue after the Goods and Services Tax was scrapped. The Sales and Services Tax put in its place cannot fully recover the loss of it.
“Of course the higher oil prices have helped to buffer some of the impact but what we are seeing from the government is a commitment to more austerity.”
Conti thinks that the fiscal deficit will be broadly stable despite the loss in revenue without the GST. — Bernama