October 11, 2019 / 8:12 AM / 2 months ago

Malaysia 2020 budget: Lower spending, wider fiscal deficit

KUALA LUMPUR (Reuters) - Malaysia on Friday unveiled a smaller budget for 2020 as revenue is expected to fall, but it plans to increase development spending to offset an expected slowdown in global demand.

FILE PHOTO: Shoppers browse groceries at a supermarket in Putrajaya, Malaysia, October 8, 2019. REUTERS/Lim Huey Teng/File Photo

The government also released its fiscal outlook and annual economic reports.

Following are some highlights from finance minister Lim Guan Eng’s speech and the economic report:


- 2020 revenue collection to fall 7.1% to 244.53 billion ringgit ($58.44 billion)

- 2020 expenditure seen at 297.02 billion ringgit for expenditure, down from 316 billion ringgit in 2019

- Fiscal deficit for 2019 seen at 3.4%, in line with earlier target

- Fiscal deficit for 2020 seen at 3.2%, wider than initial target of 3%. Deficit seen averaging 2.8% over the medium term

- State energy firm Petronas to pay dividend of 24 billion ringgit in 2020

- Operational expenditure to narrow to 241.02 billion ringgit, down from 262.26 billion ringgit for 2019

- Development expenditure to rise to 56 billion ringgit, up from 53.7 billion ringgit in 2019

- “In the event of a continued worse-than-expected external environment, the government stands ready to step in with contingency measures to provide further support or stimulus to growth,” Lim said.


- 2020 GDP growth seen at 4.8%, up from expected 4.7% in 2019

- Inflation forecast at 2%, up from 0.9% in 2019

- Exports seen growing 1%, up from 0.1% in 2019

- Current account surplus seen at 29 billion ringgit, narrowing from 43.4 billion ringgit in 2019

- Real GDP growth seen at 4.5-5% for 2020-2022, with crude oil price assumption at $60-65 per barrel

- Domestic demand seen up 4.8%

- Public sector debt at 1.1 trillion ringgit as at end-June 2019, on higher federal government debt and committed guarantees

- Services sector seen growing 6.2%, up from 6.1% in 2019

- Mining sector to grow 0.3%, down from 0.6% forecast for 2019

- Construction sector to grow 3.7%, up from 1.7% in 2019

- Manufacturing sector forecast to grow 4.1%, slightly up from 4% in 2019

- Agriculture seen expanding at 3.4%, slower than 4.3% pace forecast in 2019

- Petroleum-related revenue seen at 50.5 billion ringgit, on assumed average crude oil price of $62 per barrel

- Non-petroleum revenue to rise 6.6% to 194.1 billion ringgit


- New incentives to be finalised by Jan. 1

- Incentives include income tax exemption for up to 10 years for some electrical and electronics (E&E) companies

- To attract investments, government will make available up to 1 billion ringgit worth of customised packaged investment incentives annually over 5 years

- To form “special channel” to attract investments from China


- No plans to reintroduce goods and services tax

- To issue new samurai bonds early next year at interest rate of less than 0.5%

- Asset disposal to bring in revenue of 3 billion ringgit in 2020

- Tax rate for those earning over 2 million ringgit increased to 30% from current 28% rate


- To allocate 21.6 billion ringgit to develop high-speed internet connectivity nationwide through public-private partnerships

- To introduce 50 million ringgit grant to develop 5G ecosystem


- To allocate 24.2 billion ringgit for subsidies and social assistance, including cash aid

- To allocate 5 billion ringgit for living cost aid, widening the scheme to cover unmarried individuals aged over 40 and people with special needs aged 18 and above, with income or earnings of under 2,000 ringgit


- Government to set aside 550 million ringgit for loans for palm oil replanting

- Allocates 810 million ringgit for FELDA settlers

- Biodiesel program B20 for transport sector to be implemented at end-2020; move to raise palm oil demand by as much as 500,000 tonnes a year


- Allocation of 30.6 billion ringgit to health ministry, up from 28.7 billion ringgit in 2019

- Allocation of 64.1 billion ringgit to education ministry, up from 60.2 billion ringgit last year


- To lower threshold on high rise property prices in urban areas for foreign ownership from 1 million ringgit to 600,000 ringgit to reduce supply overhang of condominiums and apartments

- To increase minimum wage to 1,200 ringgit a month in the main urban areas in 2020

Reporting by Joseph Sipalan; Editing by Kim Coghill and Kirsten Donovan

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