Malaysia expects larger budget deficit this year

16:53, October 23, 2009      

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Malaysia expected a larger budget deficit this year, mainly due to the government's extra expenditure spent to boost the country's economy.

In the Economic Report 2009/2010 officially released by the Malaysian Finance Ministry here on Friday, the country's budget deficit for 2009 is estimated at 7.4 percent of the year's gross domestic product (GDP).

Although a lower budget deficit of 5.6 percent of GDP is estimated for 2010, it is still higher than the deficit in 2008, which was 4.8 percent.

The amount totaled to 67 billion ringgit (19.14 billion U.S. dollars) was to be spent over two years to stimulate domestic consumption, given that the export-oriented country had suffered from lower demand from abroad.

As of the end of September this year, 8.2 billion ringgit (2.34 billion U.S. dollars) was spent on both packages, slowering the pace of contraction of the country's economy to 3.9 percent in the second quarter.

The report said that the deficit would be funded entirely from domestic borrowings, given the ample liquidity in the financial system.

It also said that the Malaysian government would manage its financial resources through reducing fuel subsidies, curtailing discretionary spending and implementing competitive bidding.

The Finance Ministry forecast that the Malaysian Federal Government to increase marginally by 1.4 percent to 162.1 billion ringgit (46.31 billion U.S. dollars).

The report said that the decrease in tax revenue was partly offset by the increase in the petroleum-related revenues and non-tax revenue.

The country's 2009 expenditure is projected to grow by 8.9 percent to 213.7 billion ringgit (61.06 billion U.S. dollars) following the implementation of the two stimulus packages.

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