Malaysia will struggle to foster economic growth

Subject

Malaysia's 2019 budget.

Significance

Finance Minister Lim Guan Eng’s 314.5-billion-ringgit (75-billion-dollar) budget for 2019, tabled earlier this month, will likely be approved in parliament before year-end. The first budget under Prime Minister Mahathir Mohamad anticipates a budget deficit of 3.4% of GDP. Shortly after coming to power this May, Mahathir said he would give way to Pakatan Harapan (PH) coalition partner Anwar Ibrahim within two years.

Impacts

• The PH’s fiscal management will bolster confidence among foreign investors and credit ratings agencies.
• The lack of budget handouts to rural Malay constituencies could weaken political support for the PH in the short term.
• Government borrowing will likely become more expensive through 2019.
• The digital economy tax introduced in the budget will come into effect in 2020.
• Corruption investigations into missing revenues could result in further legal charges against members of the former government.