Thursday 28 Mar 2024
By
main news image

HOW OUR ECONOMY WILL FARE IN 2020

  • Malaysian economy to grow 4.8% in 2020 vs 4.7% in 2019. The stronger growth is underpinned by resilient domestic demand, particularly household spending thanks to stable labour market and low inflation.
  • Against the backdrop of heightening external headwinds, domestic demand is expected to spearhead growth — increase by 4.8% in 2020 after registering a 4% rise this year, spurred by the stronger private sector expenditure.
  • Private sector expenditure, which constitutes about 80% of domestic demand, is expected to anchor growth at 5.6% and 5.8% in 2019 and 2020, respectively.
  • Private sector expenditure will remain the key growth driver in 2020, with private consumption and investment rising 6.9% and 2.1%, respectively.
  • Public sector expenditure is expected to rebound to positive growth of 0.8% in 2020 after registering 1.8% decline in 2019, largely driven by the acceleration of projects towards the tail-end of the Eleventh Malaysia Plan coupled with the revival of strategic projects.
  • Private investment is expected to expand by 2.1% in 2020, which is higher compared from 1.5% growth expected in 2019, with the resumption of strategic projects, higher exports, particularly electronic and electrical (E&E) as well as the payment of tax refunds, which is also anticipated to provide impetus to private sector activities.
  • Exports are expected to grow at 1% in 2020 amidst the external headwinds. The pace is slower than the estimated 2.7% growth on imports.
  • Current account surplus in 2019 is projected to widen following the increase in the net exports of goods and services.
    However, in 2020, the current surplus is expected to narrow underpinned by rising imports coupled with widening deficits in services and income accounts
  • Import for 2020 is expected to grow by 2.7%, outpacing export's estimated growth of 1% in 2020, resulting in goods surplus narrowing to RM123.4 billion in 2020, which is 5.8% lower compared to RM131 billion expected in 2019.
  • With the introduction of targeted fuel subsidy for next year, inflation is expected to expand 2% in 2020, which is higher than 1.9% in 2019.
  • Unemployment rate will remain under a full employment condition, with the jobless rate to sustain at 3.3% in 2020. The unemployment rate is similarly stated in 2019.
    With more job opportunities expected, the total number of employed persons is projected to increase to 15.1 million in 2019 and 15.3 million in 2020.

 

HOW THE GOVT INTEND TO SPEND IN 2020

  • The government revises Budget 2020 deficit target to 3.2% of GDP, which is slightly higher than 3% originally announced in Budget 2019. In value term, the budget deficit is estimated to be RM51.72 billion in 2020 compared with RM51.76 billion in 2019 and RM53.38 billion in 2018.
  • Excluding the debt service charges, the country's budget deficit will have been RM16.77 billion (1% of GDP) in 2020, RM18.76 billion (1.2% of GDP) in 2019 and RM22.83 billion (1.6% of GDP) in 2018.
  • Federal government's total expenditure is forecast at RM297 billion or 18.4% of GDP in 2020. Operating expenditure (Opex), which is estimated to be RM241 billion, accounts for 81.1% of the total Opex in 2020, while development expenditure of RM56 billion makes up the balance.
    Opex in 2020 is lower than in 2019 when the amount swell to RM262.3 billion, or 17.3% of GDP, taking into account the one-off allocation of outstanding GST refund of RM37 billion.
  • Civil servants' emoluments to exceed RM82 billion
    Civil servants' emoluments is projected to increase by 2.6% to RM82 billion in 2019 and RM82.6 billion in 2020, primarily due to annual salary increments. Emoluments are the largest component of the government's Opex.
  • Of the 1.4 million civil servants, 67.5% of them are for the Ministry of Education and Ministry of Health, mainly teachers, doctors and nurses.
  • Civil servant pension will cost RM27.1 billion
    As for the retirement charges, it is estimated to be higher at RM26.6 billion in 2019 and to increase further to RM27.1 billion in 2020 due to annual increments and to accommodate rising numbers of pensioners and beneficiaries.
  • The number of pensioners will increase to 853,000 in 2019 and 874,000 in 2020.
  • Govt to spend RM24.2 billion on subsidies and social assistance, including RM5 billion on BSH, in 2020. Subsidies and social assistance is estimated to register RM24.2 billion, up 2.5% from RM23.6 billion in 2019.
  • About 3.6 million households continue to receive the restructured BSH, of which households with special needs children receive higher assistance and better benefits as compared to the previous BSH programme.
  • Higher development expenditure of RM56 billion
    Federal government will allocate RM56 billion for development expenditure in 2020, which is higher than the allocation of RM53.7 billion in 2019.
  • The service account on the Balance of Payment is projected to record a wider deficit of RM25 billion in 2020, compared to RM21.1 billion in 2019, mainly on higher deficits in transportation and other services accounts. The deficit in the transportation account is projected to widen to RM28.3 billion, from RM27.1 billion in 2019


HOW THE GOVT FILL THE NATION'S COFFER

For sales tax, the collection is targeted at RM15.5 billion following higher demand for four wheel drive (4WD) and sports utility vehicles (SUV) as well as machines and spare parts.

Malaysia Automotive Association (MAA) statistics show that 4WD and SUV vehicles sales for the first half of 2019 leaped 77.4% year-on-year.


HAS THE COUNTRY'S DEBT SITUATION IMPROVED?

Govt debt rises to RM799.1 billion to fund deficit
The federal government's debt stood at RM799.1 million, or 52.7% of GDP, compared with RM741.05 billion in 2018. The increase in national debt is due mainly to finance the budget deficit, which aims to stimulate economic growth.

Debt service charges climb to RM34.9 billion in 2019
The country's debt charges are expected to increase to RM34.94 billion in 2020 from RM33 billion in 2019. The charges were at RM30.54 billion in 2018.

Debt charges will be the third largest component of the government's Opex in 2020 accounting for 14.5%, the biggest being civil servant emolument (RM82.6 billion), followed by supplies and services (RM38.54 billion), according to the 2020 Fiscal Outlook and Federal Government Revenue Estimates report issued by the Ministry of Finance.

In 2019, debt service charges make up 12.5% of the government's revenue, contributed by interest payment for domestic loans and offshore borrowings.

A big bulk of govt debt is in local hands
Resident holders of the federal government debt remained well spread with holdings of RM609.1 billion, accounting for 76.2% of the total.

A diversified investor base supports an active secondary market for government securities, thus keeping funding costs low and stable.

Average time to maturity of national debt increases to 8.1 years
The average time to maturity, indicating the upcoming refinancing needs, is expected to increase from 7.6 years in 2018 to 8.1 years in 2019 after taking into account issuances for the year.

Hence, the maturity profile is more favourable with an increase in the share of outstanding debt papers of above 10 years, from 21.4% in 2018 to 25.9% as at end-June 2019.


PERFORMANCE OF EACH ECONOMIC SECTORS

The sector expansion will be backed by stable gas production derived from stronger domestic demands from the petrochemical industry and rising exports of liquefied natural gas (LNG), particularly to China, Japan, and South Korea.

      Print
      Text Size
      Share