Friday, September 28, 2012

Budget 2013: Slowing Revenues, Declining Development Expenditure

Budget 2013 signals the end of an era of record budgets with a slow down in Government revenues.

Over the past few years, the Government has been able to increase its budget tremendously to achieve record expenditures annually. This has allowed the Government to prop up the economy as we faced challenges in attracting private investments, as well as a drop in our trade contributions.

However, the Budget has projected an increase of only 0.7% (2012: 11.8%; 2011: 16.1%) in projected revenues from RM207.2 billion to RM208.6 billion in 2013.  This is the slowest projected increase in the tabled budget since 1999, barring the global financial crisis in 2009.

Consequently the Government is forced to table a smaller budget than the prior year. The proposed operating expenditure has been reduced by 0.3% from RM202.6 billion to RM201.9 billion, while the development expenditure is also reduced from RM46.9 billion to RM46.7 billion or 0.4%.

The marked decline in revenue growth will have a very significant impact on the Government’s ability to impact growth in the Malaysian economy through fiscal means.  The fact that we have not been able to reduce our budget deficit below 4% over the past few years reflects the years of wasted opportunities, where we have failed to curb our expenditure through reduced wastages, abuses and corruption.

Consistent Decline in Development Expenditure

Of concern is also how the Government has consistently reduced its emphasis on Development Expenditure which will create greater multiplier effects on our economy.

The proportion of the budget expenditure dedicated to Development Expenditure has reduced from 31.5% in 2003 to 27.1% in 2007 to 21.3% in 2012.  The worrying trend continues in 2013 where the proportion is reduced further to only 18.6%, a record low in Malaysia’s history.

This represents lower investment by the Government with its current revenue, which will result only in lower returns to the economy in future years.
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