KUALA LUMPUR (March 21): Bank Negara Malaysia (BNM) expects the fiscal deficit to narrow further from 5.0% of gross domestic product (GDP) in 2011 to 4.7% of GDP in 2012, underlining the government’s commitment to fiscal consolidation.
It said on Wednesday the government faces the challenging task of balancing between fiscal consolidation and to support initiatives to transform the country into a high-income economy.
“In the medium-term, the government will remain committed to fiscal consolidation. A successful implementation of the ETP (Economic Transformation Programme) and all other reform initiatives are expected to ensure sustainable growth which will enhance tax revenues, thus contributing to the efforts to strengthen the fiscal position of the government,” it said.
BNM said revenue collection was expected to improve to RM186.9 billion due to better tax administration and higher compliance in tax submission and collection.
Total expenditure, BNM added, would continue to support of growth with an allocation of RM181.6 billion for operating expenditure and RM49.2 billion for development expenditure.
Development expenditure would be channeled for projects and programmes under the second rolling plan (RP2) of the 10th Malaysia Plan (10MP) including transformation initiatives under the National Key Result Areas (NKRAs), National Key Economic Areas (NKEAs) and Strategic Reform Initiatives (SRIs)
“The government will continue to finance the fiscal deficit from domestic sources, mainly through the issuances of Malaysian Government Securities (MGS) and Government Investment Issues (GII), given the high domestic savings and the ample liquidity in the financial system,” it said.
As for the monetary policy in 2012, BNM said the Malaysian economy entered 2012 with increasing downside risks to growth amid softening inflationary pressures domestically.
BNM said the monetary policy would continue to operate in a complex global environment characterised by slower growth, rising uncertainties and increased volatility in the financial and commodities markets amid high liquidity in the international monetary system.
“Monetary policy in 2012 will focus on ensuring the sustainability of economic growth in an environment of price stability. Emphasis will also be placed on ensuring monetary policy remains appropriate to avoid the build-up of financial imbalances,” it said.
BNM said despite the highly challenging external environment, the fundamentals supporting the economy remain intact.
It said the Malaysian economy was expected to remain resilient and to grow within the range of 4 - 5% in 2012.
“Domestic demand will continue to be the anchor for growth. Private sector economic activity will be sustained, underpinned by stable employment conditions and a favourable outlook for the domestic- oriented sectors.
“This will be further reinforced by public sector spending and investment via the ETP and policy initiatives announced during the 2012 Budget such as the one-off financial assistance to low and middle income groups, upgrading of schools, hospitals and basic rural infrastructure and the CONSTRUCTION [] of public housing,” it said.
It said on Wednesday the government faces the challenging task of balancing between fiscal consolidation and to support initiatives to transform the country into a high-income economy.
“In the medium-term, the government will remain committed to fiscal consolidation. A successful implementation of the ETP (Economic Transformation Programme) and all other reform initiatives are expected to ensure sustainable growth which will enhance tax revenues, thus contributing to the efforts to strengthen the fiscal position of the government,” it said.
BNM said revenue collection was expected to improve to RM186.9 billion due to better tax administration and higher compliance in tax submission and collection.
Total expenditure, BNM added, would continue to support of growth with an allocation of RM181.6 billion for operating expenditure and RM49.2 billion for development expenditure.
Development expenditure would be channeled for projects and programmes under the second rolling plan (RP2) of the 10th Malaysia Plan (10MP) including transformation initiatives under the National Key Result Areas (NKRAs), National Key Economic Areas (NKEAs) and Strategic Reform Initiatives (SRIs)
“The government will continue to finance the fiscal deficit from domestic sources, mainly through the issuances of Malaysian Government Securities (MGS) and Government Investment Issues (GII), given the high domestic savings and the ample liquidity in the financial system,” it said.
As for the monetary policy in 2012, BNM said the Malaysian economy entered 2012 with increasing downside risks to growth amid softening inflationary pressures domestically.
BNM said the monetary policy would continue to operate in a complex global environment characterised by slower growth, rising uncertainties and increased volatility in the financial and commodities markets amid high liquidity in the international monetary system.
“Monetary policy in 2012 will focus on ensuring the sustainability of economic growth in an environment of price stability. Emphasis will also be placed on ensuring monetary policy remains appropriate to avoid the build-up of financial imbalances,” it said.
BNM said despite the highly challenging external environment, the fundamentals supporting the economy remain intact.
It said the Malaysian economy was expected to remain resilient and to grow within the range of 4 - 5% in 2012.
“Domestic demand will continue to be the anchor for growth. Private sector economic activity will be sustained, underpinned by stable employment conditions and a favourable outlook for the domestic- oriented sectors.
“This will be further reinforced by public sector spending and investment via the ETP and policy initiatives announced during the 2012 Budget such as the one-off financial assistance to low and middle income groups, upgrading of schools, hospitals and basic rural infrastructure and the CONSTRUCTION [] of public housing,” it said.
