Budget 2014 will have no impact on sovereign ratings, says S&P

OCTOBER 28, 2013

Standard & Poor's (S&P) Ratings Services says the Malaysian government's proposals in Budget 2014 will have no impact on sovereign ratings and the country's outlook.

It said the budget was in line with its expectations of a gradual fiscal consolidation over the medium term.

The budget targets 3.5% deficit of the gross domestic product for next year, down from 4% this year.

The rating agency said the Goods and Services Tax (GST) allows the government to diversify its revenue base, but "we expect the revenue impact of the new tax to be neutral for at least the first few years because of other revenue-reducing measures announced in the budget."

The much-anticipated GST will take effect on April 1, 2015 at 6%.

Standard & Poor's said Malaysia's slow fiscal consolidation stemmed from its relatively weak revenue structure and an inability to reduce high subsidies.

Budget 2014 and 2015 could begin to reduce concerns arising from these issues, it added. - Bernama, October 28, 2013.