Wednesday, February 10, 2010

September 11, 2009 12:30 PM

Budget Deficit Due To Govt Spending To Revive Economy & Confidence

PUTRAJAYA, Sept 11 (Bernama) -- The government's budget deficit has been brought about by the lead role it takes from the private secctor in stimulating and reviving the people's confidence in the economy during difficult times, Minister in the Prime Minister's Department Tan Sri Nor Mohamed Yakcop said.

During recession the private sector dare not invest and hence the government needs to invest slightly more to boost the people's confidence, particularly investor confidence, in the country's economy.

" Our country's philosophy on deficit budget is that during difficult times we have to spend slightly more to bring confidence in our economic system," he told Bernama after breaking the fast with staff of the Public Private Partnership Unit in the Prime Minister's Department on Thursday night.

The government has projected the budget deficit to hit 7.6 per cent of the Gross Domestic Product (GDP) this year, the highest level since 1987 due to the fiscal stimulus packages totalling RM67 billion in November last year and March this year.

Nor Mohamed said: " In difficult times we need to spend slightly more and this causes a deficit."

"Our philosophy is okay. In good times, we reduce the deficit. If possible, we have a balanced budget," he said when asked to comment on the World Competitiveness Report 2009/10 released on Tuesday by the World Economic Forum.

According to the report, Malaysia fell three notches to 23rd spot due to the deficit budget, among others.

For instance, during the 1997/98 Asian financial crisis, the government had to spend more, resulting in 5.5 per cent higher deficit in the 2000 budget but after the economy recovered, the government took measures to reduce the deficit year-by-year from 2000 till 2007 until it dwindled to 3.2 per cent.

" This showed we are careful and very prudent," he said.

Nor Mohamed said during the recessionary period last year and this year, the government also had to spend slightly more and after the economy recovered, the deficit level would come down.

" We've our own ways of managing the economy. It's not an issue. The people who wrote the World Competitiveness Report on Malaysia's position should see our track record.

" Eventhough we spend slightly more during recession, we will reduce the deficit when the economy recovers.

" We will adopt the same approach this time and in the years ahead if our economy slips into recession," he added.

-- BERNAMA

We provide (subscription-based) 
news coverage in our Newswire service.