Malaysia’s Budget 2019: The New Government’s Fiscal Priorities, Challenges and Opportunities
Leng, Yeah Kim | December 2018
Malaysia’s momentous 14th general election in May 2018 saw the opposition coalition, Pakatan Harapan, wrestling power from the Barisan Nasional coalition that had governed the country since independence in 1957. Six months later, the new government faced a crucial test in crafting the budget for 2019, not only because of the financial constraints in fulfilling its campaign promises but also in response to public calls for greater policy clarity and direction especially in the management of the economy. The 2019 budget was unveiled on 2 November 2018 by the new finance minister, who for the first time since 19981 is not the Prime Minister. This departure from past practice forms part of the institutional reforms undertaken by the new government in the wake of numerous financial scandals and irregularities associated with the previous administration. The financial mismanagement and widespread corruption have had deleterious effects on the integrity and transparency regarding how the country’s public finance and government spending had been administered, the restoration of which received topmost priority by the new government. Besides the institutional reforms to restore public trust, the new government also abolished the Goods and Services Tax (GST) upon which much of the blame for the people’s economic burden had been ascribed during the election campaign. The three-month tax holiday (August – October) prior to the re-introduction of the narrower Sales and Services Tax (SST) on 1 November resulted in a sizeable revenue shortfall and added to the revenue constraints in crafting the budget for 2019, with negative implications for longer term fiscal sustainability. In saddling Budget 2019 with the theme “A Resurgent Malaysia, A Dynamic Economy, A Prosperous Society”, the new government had to contend with numerous challenges as well as balance many competing needs. It has to ensure that economic growth is not negatively impacted as it cancels or puts on hold several mega infrastructure projects to rein in the mounting liabilities that had ballooned to over 80 percent of gross domestic product (GDP) under the previous administration. It has to ease the economic burden of the low and middle income groups that gave it the mandate to rule without imperilling fiscal sustainability and eliciting a sovereign rating downgrade. It has to instil fiscal discipline, good governance and transparency in the public administration without stymieing the day-to-day running of the government, especially in ongoing projects and services involving the private sector. This article will assess the extent to which the new government has addressed these key issues and challenges through the 2019 budget, and synchronise its fiscal policy and strategy with the current macroeconomic context and outlook. The analysis sheds light on the rationale and feasibility of the budget to strike a judicious balance between sustaining growth, full employment and price stability on the one hand and fiscal discipline and rectitude on the other, not only in the year ahead but also in the medium to long term.
CitationLeng, Yeah Kim. 2018. Malaysia’s Budget 2019: The New Government’s Fiscal Priorities, Challenges and Opportunities. © ISEAS Yusof Ishak Institute. http://hdl.handle.net/11540/9507.
Regional Economic Development
Asian Development Bank
Regional Economic Integration
Economies in transition
Gross domestic product
Economic development projects
Success in business
Communication in economic development
Restraint of trade
International economic integration
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