According to the minister, the govt needs a bit more time to achieve a balanced budget
By MARK RAO / Pic By TMR
The federal government may have to delay its balanced budget target to 2023 from 2020 to avoid stifling economic development in the country, said Finance Minister II Datuk Seri Johari Abdul Ghani.
“We need to spend in order to stimulate the economy and not disrupt it, so we need a bit more time to achieve a balanced budget,” he said when met with reporters at CIMB Group Holdings Bhd’s 10th Annual Corporate Malaysia Day yesterday.
“If we squeeze too fast (to achieve a zero fiscal deficit), it will affect the spending and the economy of the country going forward,” Johari added.
He said the government’s initial target of a zero fiscal deficit by 2020 was made when oil prices were trending at the US$100 (RM401) per barrel mark.
However, since early 2016, the oil prices crashed to as low as US$28.94 per barrel.
Johari said Malaysia is aiming to reduce its fiscal deficit to 2.8% this year compared to the 3% registered in 2017, which will be achieved through improving tax compliance among local corporates and reducing overhead costs.
“This will not be an overzealous approach, but is aimed at achieving tax compliance across the country,” he said.
Johari said the government will take a gradual approach to compliance, to ensure it will not affect businesses in the country negatively.
The government is looking at increasing productivity via innovation and e-government approaches to cut down expenses.
Despite gross domestic product (GDP) growth expected to moderate at 5% to 5.5% this year, Malaysia is expected to get a boost from improved trade as the global economy has been projected to grow by 3.7% by the International Monetary Fund (IMF), higher than the 3.6% achieved in 2017.
“This year, exports should see a double-digit growth, while total trade is set to improve from its current value of RM1.5 trillion,” Johari said.
“We are also well-diversified in the world with trade — with China, the US, Europe, Japan, Korea and Asean countries providing a good balance to our economy.”
Malaysia is edging closer to achieving its target of a 20% GDP contribution from the digital economy by 2020, with the current contribution at about 18%.
It is in line with the country’s strategy of establishing digitalisation as a core pillar to support existing economies.
“The new technology and fourth industrial revolution do not only present opportunities, but also raise challenges and big questions,” Johari added.
“For business and corporate entities, consumers will now demand faster and better services at a lower cost.”
The rise of alternative currencies and assets such as cryptocurrency also pose some challenges in the financial industry.
The Malaysian Reserve reported this week that the government will not impose a blanket ban on cryptocurrency trading such as bitcoin, but will instead look to regulate digital currencies.
Bank Negara Malaysia will also ensure that digital currency exchanges (DCEs) comply with requirements to conduct customer due diligence and report suspicious transactions to the relevant authorities.
“Very recently, the central bank has proposed to include DCEs within the ambit of Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 as a means to manage the risk of digital currencies — as opposed to imposing a blanket ban on digital currencies trading,” Johari said in his speech.