Federal Govt widens 2020 fiscal deficit target to stimulate growth

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KUALA LUMPUR (Oct 11): The 2020 Budget deficit target has been revised to 3.2% of GDP, which is slightly higher than 3% originally announced in the 2019 Budget.

However, the overall deficit in 2020 is expected to be lower compared with 3.4% in 2019 with fiscal consolidation remaining on its trajectory and the debt position at a manageable level.

The Federal Government will allocate an additional injection of 0.2% of GDP through development expenditure to revitalise public investment via capital formation in strengthening long-term potential of the domestic economy, said the Ministry of Finance in the 2020 Fiscal Outlook and Federal Government Revenue Estimates report.

The report said the allocation will be mainly channelled to accelerate the implementation of impactful transportation and connectivity projects, such as the construction of Pan Borneo Highway, Mass Rapid Transit 2 and Gemas-Johor Bahru Electrified Double Track Project.

“This is due to the Government’s strategic decision to strengthen domestic economic activities as pre-emptive measures to provide immediate support and sustain the growth momentum in the light of slower global growth forecast,” said the report.

In value terms, 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 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.