BUDGET 2019 indicates Malaysia’s high debt levels are likely to persist for longer than expected, as deficits are likely to remain above 3% of the gross domestic product until 2020, said Moody’s Investors Service.
“By Moody’s calculations, government debt will edge up to 51.1% of GDP next year from an estimated 50.6% this year.
“At these levels, debt remains higher than the A-rated median forecast of 40.9% for 2018, emphasising fiscal constraints as a key credit challenge,” the international rating agency said in a statement today.
Moody’s also said that in the near term, it is likely that any further reduction in the deficit will largely rest on securing revenue from non-tax sources, including higher dividends from state-owned enterprises, and/or by continuing to cut spending.
“A number of measures, both implemented and planned, reflect the government’s drive to increase the transparency and accountability of the public accounts.
“However, disclosure of the size of ‘committed government guarantees’ to entities that require regular financial support could add up to 10.5% of GDP to future government debt, given the now greater likelihood that some of these entities’ debt payments will be assumed by the government,” Moody’s added.
Budget 2019, announced by Finance Minister Lim Guan Eng on November 2, targets a fiscal deficit of 3.4% of GDP for next year, slightly narrower than the latest official estimates of 3.7% for 2018.
However, projections for 2018 are above the original budgeted targets of 2.8% of GDP.