MADANI Govt’s Fiscal Discipline boosting Investor Confidence
By Durratul Ain Ahmad Fuad
KUALA LUMPUR, Feb 19 (Bernama) -- The Madani government's fiscal discipline has successfully reduced the fiscal deficit from 5.5 per cent in 2022 to 4.1 per cent in 2024, demonstrating a strong recovery in debt reduction and boosting global investor confidence, said an economist.
Juwai IQI global chief economist Shan Saeed noted that countries with lower debt attract significant attention in the global economy, as it signals strength to investors who view the government's economic policies and balance sheet as solid.
“The higher revenue generated by the government in 2024 has contributed to debt reduction. Moreover, the government has continued to review economic policies, focusing on projects that significantly contribute to gross domestic product (GDP) growth without increasing the debt on the balance sheet.
“The decrease in the fiscal deficit demonstrates that fiscal discipline has become a strategic priority for the government and Prime Minister Datuk Seri Anwar Ibrahim has ensured that growth remains high, infrastructure positively impacts GDP, and macroeconomic stability supports overall aggregate demand and investment in the economy,” he told Bernama.
According to Bank Negara Malaysia, the Malaysian economy grew by 5.1 per cent in 2024, up from 3.6 per cent in 2023, in line with the government's target of between 4.8 per cent and 5.3 per cent year-on-year.
The growth is mainly due to continued expansion in domestic demand and a rebound in exports.
The Ministry of Finance said that, in addition to GDP exceeding the initial official forecast in 2024, the government also surpassed its fiscal deficit target for the year, achieving 4.1 per cent against the targeted 4.3 per cent.
The fiscal deficit is expected to decrease to 3.8 per cent in 2025.
Shan said that Juwai IQI expects Malaysia’s economy to continue expanding between five and six per cent in 2025.
“We anticipate investor confidence will remain high, and Malaysia’s strategic geography will boost exports, bringing in much-needed foreign direct investment and keeping the country on the global investors' radar,” he added.
Meanwhile, Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said approved investments have a positive impact on the fiscal deficit.
“When more companies invest in their production capacity, it accelerates their ability to produce efficiently. In other words, companies can sell more and generate higher revenue, which is taxable by the government,” he said.
He also noted that the sharp reduction in the fiscal deficit in 2024 indicates that the government's efforts to reduce the debt level are taking effect.
He pointed out that the statutory debt which comprises the Malaysian Government Securities, Government Investment Issues, and Malaysian Islamic Treasury Bills, is about 62.5 per cent of GDP as of 2024, slightly higher than the previous 61.7 per cent but still below than the 65 per cent limit.
“However, more needs to be done to ensure that it reaches the 60 per cent target under the Public Finance and Fiscal Responsibility Act 2023,” he added.
Mohd Afzanizam emphasised that the government is also mindful of the plight of Malaysian citizens, partcularly relating to the cost of living, where fiscal consolidation tends to have an inflationary impact.
“Therefore, the government is trying to strike the right balance, and so far, they have done well. If we look at the inflation rate, it has consistently decreased from 3.3 per cent in 2022 to 2.5 per cent (in 2023) and 1.8 per cent in 2024,” he said.
-- BERNAMA