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Higher-than-projected fiscal deficit will not affect rating - Stanchart

Last update: 09/10/2019
KUALA LUMPUR, Oct 9 -- Higher-than-projected fiscal deficit for 2020 will not raise rating concerns for Malaysia as long as the medium-term fiscal consolidation target is adhered to, says Standard Chartered.

The bank said it expected Malaysia's 2020 fiscal deficit to be at 3.2 per cent, which is higher than the projected 3.0 per cent, but lower than 3.4 per cent anticipated for 2019.

“The moderation in the pace of fiscal consolidation should not come as a surprise as the government has hinted at a more gradual fiscal consolidation path, given the soft economic outlook.

“Nevertheless, we do not expect this to raise rating concerns given the challenging economic outlook, ” it said in a note.

Standard Chartered said a significant fiscal stimulus package was unlikely given still-resilient growth in Malaysia and the fall in non-oil related revenue which can be largely attributed to the goods and services to sales and service tax (GST-SST) shortfall.

Furthermore, it said the government had said that there were no plans for new tax measures in the 2020 budget.

“We expect the government to focus on rationalising expenditure, such as tax incentives, and tightening the administration of revenue collection,” it added.


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