The tabling of the federal government budget is still ongoing but the Economic Report for 2013 by the Ministry of Finance is already out. Here is where the projected GDP figures and government finance are available for the first time.

I think the biggest point about this year’s budget is government spending. In most years, the fiscal deficit ratio (fiscal deficit to nominal GDP) dropped because the nominal GDP grew and not because actual deficit was down. This year, government spending is projected to come down.

Operationing expenditure is projected to fall by 0.3% and development expenditure is projected to fall by 4.2%. Overall expenditure is expected to decline by 1.1%.

The drop in operating expenditure is projected to come mostly from a drop in emolument (the civil service, really) and subsidies. For most people, this suggests that there will be a large subsidy cut in 2013. Pensions and gratuities are also projected to come down. This is a signal that something right is happening in the overly fat civil service. But then again, money to the civil service grew massively in 2012 that the cut in 2013 is pale.

Having a declining total government spending is rare. Between 1975 and 2012, there were only four times when total government spending decreased: 1983, 1985, 1987 and 2010.

Being a libertarian, I might be happy with this particular budget. But as I have been warned, I should wait until it happens.

This also means one thing. With the projected drop in government spending, politically, election must be held early in 2013 or even in 2012. It will be hard to achieve the reduction if election is held very late up to the constitutional limit. The later the election, the more electioneering will there be.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved
errata — the peril of rushing. I made a number of mistakes in the earlier version of this entry, ranging from grammar to the numbers themselves. First, I had asserted that if the government stuck with the budget, it would have been the first time in ages that total government spending would decrese. While such year is rare, the last time that happened was in 2010. Second, I incorrectly calculated the overall expenditure growth rate.  I apologize for that and I have corrected those mistakes. 

2 Responses to “[2602] 2013 Malaysian federal governmet budget is smaller!”

  1. on 28 Sep 2012 at 17:57 moo_t

    Is the bottle half empty or half full? Are you half awake or half asleep ? Can price increase before a discount call a discount? ibjib of Bolehland(TM) has a track record of passing “supplementary suppl bill”. We will see.

    OTH, people on the street well aware of their food packed in “discounted weight/size”. ;-)

  2. […] After reading a number of commentaries in the market, in the Malaysian econosphere and various research houses’ research papers, I became curious of the accuracy if government projection with respect to its finance. I was also curious at how serious I should take the government’s plan to cut its expenditure. […]

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