KUALA LUMPUR (Sept 30): Prospects for economic recovery in the near term appear more favourable, supported by the country’s National Recovery Plan’s (NRP) systematic re-opening of various economic sectors, including social activities such as dining-in and tourism, said the Ministry of Finance (MoF).
In a statement on Thursday, MoF said 2022 growth is expected to rebound in line with the recovery in the global economy and trade throughout the second half of 2021 and next year, particularly as more countries step up their vaccination efforts.
“As a small and open economy, Malaysia’s recovery is highly dependent on the global economic recovery, particularly that of our major trading partners,” it said.
The continued implementation of economic and fiscal stimulus measures will also support Malaysia’s economic growth, which is expected to remain strong at 6% and 5.8% according to the International Monetary Fund and the World Bank estimates, respectively, it added.
These were among topics discussed at the Fiscal Policy Committee chaired by Prime Minister Datuk Seri Ismail Sabri Yaakob on Thursday, which met for the second time this year.
The committee also discussed the government’s fiscal outlook for the coming year, as well as its medium-term fiscal trajectory. The government had raised the deficit target to range between 6.5% and 7% to gross domestic product (GDP) from the initial target of 5.4%, taking into account additional fiscal injections in four assistance packages announced this year, namely PERMAI, PEMERKASA, PEMERKASA Plus and PEMULIH, totalling RM225 billion or 14.8% of GDP.
“The government’s fiscal policy will continue to be centred on providing constant support in promoting a sustainable economic recovery and the smooth implementation of the recently announced 12th Malaysia Plan (12MP) (2021-2025),” said MoF.
“Of immediate priority is restoring the nation’s potential growth capacity to allow communities and businesses to adjust to new norms, as well as to invest for future growth and better job opportunities. Given the need for spending flexibility during this unprecedented pandemic crisis, the government will table a motion during the current Parliamentary sitting to raise its statutory debt limit from 60% to 65% of GDP,” it added.
MoF also pointed to the government’s continued commitment to fiscal consolidation in the medium term as outlined in the 12MP, with a deficit target of 3.5% of GDP by 2025.
“To achieve this, the committee also deliberated on the application of a variety of fiscal tools to balance the government’s spending needs with fiscal sustainability. These measures include improving revenue collection, enhancing spending efficiency and managing debt more prudently.
“To achieve long-term macroeconomic and fiscal stability, the committee has agreed that medium-term fiscal consolidation will have to be more robust than previously planned, while keeping pace with expected economic recovery.”
MoF also said it is currently consulting with and gathering inputs from various stakeholders in preparation for Budget 2022, scheduled to be tabled in Parliament on Oct 29.
“These efforts will be aligned with the 12MP’s medium-term macroeconomic strategies, designed to catalyse an inclusive and sustainable growth for all Malaysians.”