KUALA LUMPUR (Oct 29): The federal government's revenue for 2021 is estimated to be lower at RM221 billion or 14.6% of gross domestic product (GDP) in 2021, a 6.7% shortfall from the budget estimates earlier.
The 2021/22 Economic Report said that the lower than budgeted federal government revenue was a result of the various Movement Control Order (MCO) imposed in order to safeguard the rakyat, businesses and economy.
There is no surprise then that the shortfall in revenue stems from lower tax revenue. Nevertheless, the report said that the shortfall will be cushioned by additional revenue from higher average crude oil and palm oil prices as well as additional dividend and a special payment from government's entities.
Meanwhile, total expenditure for 2021 is estimated to come in at RM320.6 billion, marginally lower by 0.6% from the budget estimates of RM322.5 billion. Expenditure has been redirected to accommodate the additional assistance and economic stimulus packages, said the report, resulting in higher spending requirements under the Covid-19 Fund.
Operating expenditure will be rationalised by 7.1% or RM16.9 billion at RM219.6 billion, largely from supplies and services as well as grants to statutory bodies with high reserves.
As for development expenditure, it is expected to reduce by 10.1% to RM62 billion from the budget estimates of RM69 billion. A number of development projects were reviewed and rescheduled following the implementation of MCO.
On the other hand, the Covid-19 Fund allocation is estimated to increase by 129.4%, or RM22 billion, to RM39 billion in order to finance the additional assistance and stimulus packages, according to the report.
On that account, with spending increased to provide additional fiscal support to the economy, the fiscal deficit for 2021 is projected to widen to 6.5% of GDP on the back of additional fiscal injections and lower GDP projections.
In 2020, the fiscal deficit amounted to 6.2% of GDP.
The report added that excluding debt service charges, the primary balance is expected to increase to 3.9% of GDP in 2021 compared with 3.8% in 2020.
For more stories on the Economic Report 2021/2022, click here.