Govt needs to lower budget deficit to 3 pct or less by 2028 — Maybank IB

LUMPUR: The government should bring down the budget deficit to three per cent or less the earliest by 2026 or latest by 2028, in line with the fiscal reformsintheFiscalResponsibility Act (FRA), according to Maybank Investment Bank.

Maybank group chief economist Suhaimi Ilias said the government has indicated that it would focus on rationalising fuel subsidy, the largest subsidised item and social assistance in the country, with the aim to reduce the subsidy spending by RM6 billion.

“It has no choice and I think that in terms of execution and implementation, one thing that is very real in fiscal reform is the FRA.

“I guess there is a (sort of) factor in terms of legislation that would basically add to the credibility of the notion on fiscal consolidation and fiscal reforms in Malaysia,” he said during the virtual 2024 Market Outlook Media Briefing recently.

He noted that the underscoring commitment besides the FRA is the launch of the Central Database Hub (PADU).

“Of course, there are controversies and issues concerning data integrity and data security, but I think the government just have to deal with these issues because PADU is important to identify details in targeted subsidies,” he said.

He also expects to see further policy announcements to complement and follow up on the macro or big-picture blueprints, masterplans and roadmaps, especially at the sector or industry levels.

“The Government Procurement Act (GPA) is the next key legislative measure after FRA on fiscal reforms to further enhance fiscal governance and strengthen discipline and oversight in public finance,” he said, adding that it is expected to be tabled at Parliament in the second quarter of 2024.

Other than that, Suhaimi pointed out that the progressive wage policy would be a key agenda on economic reforms and restructuring of the labour market in 2024.

“Obviously, the policy will not be implemented fully this year, during which time the government will assess the pilot programme in June until September and I expect its full implementation to be in 2025.”