Economy slows but Pemandu says on track to cut deficit to 4.7pc
KUALA LUMPUR, June 15 — Pemandu insisted today that the federal government will continue to cut its deficit this year despite economic growth falling short of Putrajaya’s target so far and a new supplementary supply bill asking for RM13.8 billion more to spend.
The administration’s efficiency unit, which unveiled plans in 2010 to bring the national debt under control by narrowing the deficit, said that per capita income has risen ahead of targets and would help secure higher government revenue.
“The good news is that gross national income per capita has grown. Last year it was US$9,700 (RM30,700); when in 2009, it was US$6,700. We are still on track for a 4.7 per cent deficit,” Pemandu chief executive Datuk Seri Idris Jala (picture) told reporters.
The federal government tabled a supplementary supply bill yesterday asking for RM13.8 billion more to spend this year, fuelling fears the Najib administration will not be able to rein in the deficit and breach the statutory debt ceiling.
The Bill allocates RM360 million to the Election Commission (EC), RM113 million to the Prime Minister’s Department, RM446 million for the Works Ministry and a whopping RM11.2 billion for “treasury general services” ahead of federal polls that must be called within the year.
It also said RM7.5 billion was earmarked for “liquefied petroleum gas, diesel and petrol subsidies and cash aid,” more than half the extra expenditure despite a key instrument in cutting the deficit being subsidy reduction, which has been on hold for a year now.
Najib, who is also finance minister, said late last month the government will ensure that Malaysia’s debt will not exceed the statutory ceiling under the Loan (Local) Act and Government Funding Act due to its prudent management of the nation’s finances.
He said the national debt stood at 53.5 per cent of the GDP, which was RM881 billion in 2011 after a recent revision, leaving Malaysia just RM13 billion shy of the 55 per cent debt limit.
The Najib administration has pledged to cut the fiscal deficit, which dropped to 4.8 per cent of GDP last year from a 22-year high of over seven per cent in 2009.
But Malaysia’s slowing economy, which recorded a third consecutive quarterly dip in growth to 4.7 per cent in the first three months of the year, has raised questions of whether the federal government can keep spending in check.
The 4.7 per cent fiscal deficit for this year is based on a projected GDP growth of five to six per cent.
But Idris, who is a minister in the prime minister’s department, said that “we live in a real world where the global economy is tied to our trade and exports have slowed.”
Analysts have warned Malaysia to brace for a significant slowdown here due to rising linkages with top trade partners including China, the world’s second largest market which economists say is headed for a sixth consecutive quarterly drop in growth with worse yet to come.
A Greek exit from the euro zone, which is growing threat, would cause a second recession in as little as four years in Malaysia as the knock-on damage to Europe poses a threat to the global economy, Bloomberg reported analysts and economists as saying recently.
The World Bank also urged Malaysia last week to expedite reforms such as subsidy cuts and broadening the tax base, key initiatives that have stalled ahead of an impending federal election, if it wants to achieve Putrajaya’s target of being a high-income economy by 2020.
“If BN continues to spend according to the current Budget, this will have a severe impact on the deficit level and can breach the 55 per cent statutory limit of debt-to-GDP ratio,” opposition leader Datuk Seri Anwar Ibrahim said recently after the Q1 2012 GDP figure was released.