KUALA LUMPUR (Nov 2): Malaysia's 2019 fiscal position will be set at a new base, which will reset the new fiscal consolidation trajectory moving forward to achieve a fiscal deficit 3.4% of gross domestic product (GDP).

The Finance Ministry said today in Economic Report 2018/19, titled Fiscal Outlook 2019 that with a narrow revenue base, there is a need for a more thorough expenditure review.

"In this regard, the Government has undertaken the zero-based budgeting approach in formulating 2019 Budget to improve spending efficiency," the ministry said.

The ministry said total revenue excluding Petroliam Nasional Bhd (Petronas) special dividend is expected to decline by RM4.6 billion to RM231.8 billion mainly due to lower interest and investment income despite higher tax collection.

According to the ministry, operating expenditure excluding tax refunds is estimated to decrease by RM12.6 billion to RM222.9 billion in line with the new budgeting approach under zero-based budgeting.

The ministry said development expenditure is forecast to remain around RM55 billion.

"After taking into account RM7 billion to partially finance the refunds, the fiscal deficit is expected to reduce to RM52.1 billion or 3.4% of gross domestic product, reflecting efforts to regain fiscal consolidation momentum during the adjustment period," the ministry said.