Lim denies Nomura’s claim on Malaysia’s fiscal deficit

Lim is confident that Malaysia is able to meet all of its fiscal deficit targets on higher SST collection


FINANCE Minister Lim Guan Eng has downplayed the concerns raised by Nomura Global Markets Research that Malaysia’s fiscal deficit would increase to 3.9% of the GDP for 2018.

Lim is confident that Malaysia is able to meet all of its fiscal deficit targets as a result of higher than expected collection from the Sales and Services Tax (SST) for the November-December 2018 period.

In addition, Lim said the government’s reduced dependency on petroleum income will see the country achieving its GDP deficit target for the next three years.

“I have checked with the preliminary financial accounts that were closed and the government’s fiscal position is well within the 3.7% GDP deficit target for 2018.

“Nomura’s report that the 2018 fiscal deficit would deteriorate to 3.9% of GDP is simply untrue,” Lim told reporters at a press conference in Putrajaya yesterday.

Lim said the collection of SST as at Dec 31, 2018, stands at RM5.4 billion — exceeding the initial projection of RM4 billion by 34%.

Additionally, the government’s dependency on oil revenue has declined to 19.5% this year compared to 41.3% in 2009.

“This suggests that while petroleum is an important source of revenue, it is becoming less and less important to public finance,” Lim said.

Nomura had downgraded Malaysia’s shares on Wednesday, stating the new government’s lack of “significant reform push” could lead to a worsening fiscal position and a slip in credit ratings.

The Japanese bank’s stance on Malaysian stocks had moved from ‘Neutral’ to ‘Underweight’, premised on poor corporate earnings and the new government’s lack of “significant reform push”.

“On the reforms front, we are hoping the government would deliver more progress in areas to improve government efficiency, reduce corruption and crony capitalism, and potentially roll back or ease the government’s presence in some areas to promote and create a level playing field with the private sector,” Nomura said in its report.

Lim maintained that the government has been upfront that fiscal reforms will take three years to complete, with more measures expected to be announced for 2020.

He said three other credit rating agencies — Fitch Ra- tings Inc, Moody’s Corp and S&P Global Ratings — have all maintained the government’s credit ratings at A3 or A-.

Meanwhile, Lim has also denied Bloomberg’s report that the government has hired HSBC Holdings plc, Mizuho Bank Ltd and Nomura Hol- dings Inc for its Samurai bond sale.

The government is expected to reveal the arrangers of the Samurai bond next week in the presence of the Japanese ambassador, according to Lim.

The bond could raise an estimated ¥200 billion (RM7.58 billion).

“The report on Samurai bonds is not true. Let’s not get into the specifics. How much of it is untrue, you will know next week,” Lim said.