A Bigger Budget with a Smaller Deficit

It is well known that GDP in Malaysia has been rising substantially over a thirty years. One of the reasons that make GDP increasing over a year and a year is the government expenditure. Government Expenditure defines the purchase or payment of goods and services that are not provided by the private sector but it is important for national welfare. Those expenditures are including emoluments, subsidiaries, general administration, public investment, and other expenses.

Economic analysis

In the article, we know that Malaysia has set Budget 2018 with the amount of RM280.25billion which is 7.5% higher than the previous year RM260.8billion. Government gets the money through borrowing and revenue for Budget 2018. 14.4% of the Budget 2018 is come from borrowing by using of government assets as advance and the rest of 85.6% will be come from revenue that government earn, examples, indirect tax which is the tax that government charge from us when we make a single payment, direct tax, which is calculated in percentage that charge from our salary, and the last one would be non-tax revenue which includes petroleum royalties, investment income from Bank Negara Malaysia, Khazanah National Bhd and motor licences and foreign worker permits.

According to previous year’s GDP, expenditure from private sector always is the primary driver of growth with private investment and consumption growing 8.9% and 6.8% respectively. However, expenditure from public corporation tends to decline in 2018 due to lower capital outlays. Government allocates the budget into two ways, a total of RM234.25billion for operating expenditures and RM46billion for development expenditures. Compare to last year, operating expenditures is 6.5% higher in 2018, while the development expenditures increase slowly by 0.1%. Under operating expenditures, government use RM79.15billion (28.2%) of the RM234.25billion for emoluments which have the biggest portion among the expenditures. Second large expenditures come with the supplies and services expenditures 12% (RM33.62billion) which showing an increase of 3% compare to last year while refunds and write-offs will increase 10.7% to RM888million in 2018. Malaysia’s debt service charges are going to be increase 7% from RM28.87billion for 2017 to RM30.88billion due to the huge amount of interest on borrowings. Other large expenditure, including retirement charges, has been allocated with RM24.55billion and subsidies expenditures will be seeing the largest increase in allocation in 2018, up 15% to RM26.54billion from RM23.09billion in 2017. Grants and transfers to state governments and grants to statutory bodies will be increased by 0.8% to RM8.02billion and 2.6% to RM13.1billion respectively. Finally, for the operating expenditure, 11.2% (RM31.48) will put under other expenditure including grants to statutory bodies such as public universities, trade and investment promotion agencies.

Of the amount allocated for development expenditure, RM26.34billion will go to the economic sector, RM11.72billion to the social sector, RM5.21billion to security and RM2.72billion to general administration. The social sector shows a decrease of 3.3% in 2018 to RM11.72bilion. The biggest cut is from education and training, which will be 11% lower at RM5.26billion compared to 2017’s RM5.9billion. However, housing will see a 34.1% increased to RM1.17billion and health, 24.7% to RM1.91billion. As for the economic sector, only the energy and public utilities, and agricultural and rural development will get larger pieces of the pie with a 9.2% increase to RM2.75billion and 4.4% increase to RM2.52billion respectively.