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A better financial outlook with prudent spending

THE Federal Government is expected to be in a better fiscal position during the five-year long 11th Malaysia Plan with a reduction in deficit expected thanks to higher revenue.

At the end of the 11MP, the fiscal deficit is expected to account for 0.6% of Gross Domestic Product (GDP) compared with a deficit of 3.2% expected at the end of 10MP (2011-2015), as the country moves towards a developed nation status in its quest to achieve Vision 2020.

During a recent media briefing, Minister in the Prime Minister’s Department Datuk Seri Abdul Wahid Omar outlined the macro-economic targets of the five-year plan, as well as, achievements of the previous plans.

During the 11MP, government revenue is expected to increase 7.9% annually to reach RM1,407.9bil, despite being dented by lower crude oil prices, versus RM1,050.2bil with a yearly growth of 6.9% targetted under the 10MP, thanks to the full effect of the Goods and Services Tax.

Operating expenditure is expected to be a moderate RM1,289.9bil based on prudent spending, with 6.4% increase a year compared to an increase of 7.0% a year in the previous Plan.

Meanwhile, the government debt position of RM774bil during the new plan will account for 43.5% of the GDP at end-2020 against RM622.7 billion or 53.3 per cent of GDP at end-2015.

During the 11MP period, the government will strengthen macro-economic resilience to increase growth whereby fiscal policy flexibility will be enhanced to ensure a sustainable fiscal position.

Among others, the government will increase productivity potential to ensure a sustainable and inclusive growth, encourage investments to spearhead economic growth, as well as, increase exports to improve balance of trade.

During the 11MP period, the private sector will still assume the leading role in spurring the economy with real private investment growing an average 9.4% with a value of RM291bil in current prices.

This is a higher increase compared to that of public investment which should grow at an average 2.7% with investment value at RM131bil.

In terms of fiscal position, the Federal government’s debt will be below 45% of GDP and a balanced fiscal position is expected for 2020.

Under the 11MP, growth will be driven by domestic demand, as well as, the bigger contribution from the external sector.

Focus will be on quality private investment in the manufacturing and services sectors to create high-income jobs.

Both public and private investments will be driven by infrastructure projects such as the high-speed train, Mass Rapid Transit 2, Light Rail Transit 3 and the Pan Borneo Highway.

Private consumption will increase in line with the country’s prosperity while public consumption will moderate due to prudent spending.

For the external sector, exports will account for 62% of GDP in the new plan, lower than a contribution of 74.4% in 10MP.

In terms of economic activities, the manufacturing and services sectors will spearhead growth.

The manufacturing sector is expected to increase 5.1% during the 11MP period compared with 4.8% in 10MP while the services sector is expected to increase 6.9% against 6.3% in the previous Plan.

The agricultural sector is targeted to increase 3.5% during the 11MP compared with 2.4% in 10MP while that of mining will increase 1.3% against 0.9 per cent.

However, the construction sector will grow at a slower 10.3% during 11MP when compared to the 11.1% expansion during 10MP.

Meanwhile, the current account of the balance of payment will continue to record a surplus following the better performance of the Goods and Services account.

This includes a higher export target for complex goods and modern services, stronger integration through regional trade pacts, as well as, efforts to internationalise supplier of goods.

Meanwhile, the increase in the primary income will be due to the initiative to encourage re-investment of income from targeted foreign direct investment, as well as, a comprehensive and conducive eco-system for new investments.

Finally, the high income nation target is expected to be achieved by 2020 with GNP per capita of US$15,690 (RM54,100) in 2020 from US$10,196 (RM36,937) at the end of 2015. – Bernama

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