SINGAPORE (Dec 31): Malaysia’s political scene is looking as unpredictable as its economic outlook, and looks set to keep analysts, investors and news reporters on the edge of their seats in the year ahead.

After nine years under former prime minister Najib Razak, who presided over the misappropriation of billions of dollars, Malaysian voters defied political pundits and polls and booted out the Barisan Nasional (BN) coalition that had ruled the country for more than six decades.

Since the May 9 victory at the polls by a Pakatan Harapan coalition led by Dr Mahathir Mohamad, Malaysia has not stopped making headlines around the world. And it is likely to continue being watched closely in 2019.

With the new PH government repeatedly emphasising that its priority was to put the country’s financial house in order, many market watchers were bracing for an austere budget for 2019. But it was not as bad as expected.

In November, finance minister Lim Guan Eng unveiled a budget allocation of RM314.55 billion, which was 8.3% larger than the revised estimate of RM290.35 billion for 2018. This included a return of some RM37 billion in outstanding tax refunds — RM18 billion related to income tax, and RM19 billion related to GST.

The government is projecting revenue of RM261.81 billion for 2019, up from 10.7% from a revised estimate of RM236.46 billion for 2018. That is despite stopping GST since June 1, and replacing it with the Sales and Service Tax since Sept 1. Included in the projected government revenue for 2019 is a special dividend of RM30 billion from Petroliam Nasional (Petronas).

These numbers translate into an expected budget deficit of 3.4% of GDP, lower than the 3.7% chalked up for 2018.

“The Harapan administration is committed to maintaining a path of fiscal consolidation to achieve a deficit of 3.4% in 2019, 3% in 2020 and 2.8% in 2021. Over the medium term, we expect the deficit to be reduced further to the region of 2%,” Lim said in his budget speech.

But why could achieving this consolidation be a challenge for Malaysia? Find out more in The Edge Singapore Issue 863 (week of Dec 31), available at newsstands now.

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