KUALA LUMPUR: The government remains fully committed to fiscal consolidation and ensuring fiscal sustainability, Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz said.
Tengku Zafrul's comment came in light of Standard & Poor's (S&P) upgrade of Malaysia's outlook, while expecting its growth dynamics to offset vulnerabilities associated with its weak fiscal settings despite the elevated budget deficits.
"Supported by the gradual implementation of the Medium-Term Revenue Strategy which aims to improve the country's revenue base, the government will resume its consolidation path gradually and strategically as the recovery becomes more firmly entrenched.
"This will balance short-term fiscal requirements with long-term fiscal and economic sustainability," Tengku Zafrul said in a statement today.
S&P reaffirmed Malaysia's sovereign credit ratings at A- and revised the outlook from "Negative" to "Stable".
This revision reflected Malaysia's effective Covid-19 policy response, which had enabled a strong economic recovery, as well as the country's resilience amid an uncertain and highly challenging global landscape, the rating agency said.
"The stable outlook reflects our expectations that Malaysia's steady growth momentum and strong external position will remain in place over the next two years.
"We revised the outlook to stable in recognition of Malaysia's consistently strong growth trend that is faster than sovereigns of similar income level," it said.
S&P expects Malaysia's gross domestic product (GDP) to grow by 6.1 per cent in 2022 and 5.0 per cent in 2023.
Tengku Zafrul said given first quarter growth of 5.0 per cent, S&P's forecast was in line with the government's expectation of higher growth in subsequent quarters, and in alignment with the higher end of Bank Negara Malaysia's official estimate of 5.3-6.3 per cent.
He said as part of its reform initiatives to strengthen public finances by improving fiscal discipline, expenditure effectiveness, and transparency, the government was also working to enact the Fiscal Responsibility Act (FRA).
The FRA will strengthen the credibility of its fiscal policy conduct in order to achieve long-term fiscal sustainability and macroeconomic stability.
"Expected to be tabled by end of this year, the FRA will increase transparency and accountability in particular by publishing a tax expenditure statement, a mid-year budget report, and a fiscal risk statement," he added.
Tengku Zafrul said the government would continue to respond strategically, proactively and decisively – given an increasingly uncertain external environment and high global inflation which have also caused inflationary pressures domestically – to ensure the economy remains on a strong recovery trajectory.
Source: https://www.nst.com.my/business/2022/06/808697/malaysia-resume-consolidation-path-following-sps-upgrade-tengku-zafrul