Deficit can be reduced to 4.6% of GDP despite stimulus package, says Wahid Omar

(FMT) – The former head of the government’s Economic Planning Unit says the RM25 billion direct fiscal injection, as part of the Covid-19 stimulus package announced yesterday, will increase the country’s fiscal deficit to RM99 billion, or 6.2% of the gross domestic product (GDP).

However, Abdul Wahid Omar says there are measures which the government can take to increase its revenue and reduce operational expenditure which can bring this down to RM74 billion, which is 4.6% of the GDP.

In a social media posting, the former minister in the Prime Minister’s Department said a 4.6% deficit would be much lower than the 6.7% deficit recorded during the global financial crisis of 2009. Then, Malaysia had unveiled an RM60 billion stimulus package.

Yesterday, Prime Minister Muhyiddin Yassin had announced a RM250 billion stimulus package aimed at cushioning the impact of the Covid-19 crisis.

Wahid said a 4.6% deficit would be in line with Muhyiddin’s statement that the government will ensure the country’s fiscal position and debts are kept at a sustainable level.

“A deficit of under 5% will reduce the pressure on Malaysia’s current international credit ratings of A3/A-.

“It will also give the government room to implement additional measures if the Covid-19 outbreak lasts beyond six months.”

Meanwhile, Wahid described the stimulus package as comprehensive and one that looked into the welfare of the people.

“Overall, a stimulus package that aims to protect the people, support businesses and strengthen the economy is appropriate for these difficult, unprecedented and unpredictable times.

“Let us be constructive and together play our roles in overcoming this global crisis which is threatening our lives and well-being,” he added.