{"id":15210,"date":"2015-09-15T15:38:44","date_gmt":"2015-09-15T07:38:44","guid":{"rendered":"http:\/\/maddruid.com\/?p=15210"},"modified":"2015-09-30T16:48:06","modified_gmt":"2015-09-30T08:48:06","slug":"3000-what-is-the-fiscal-deficit-status-now","status":"publish","type":"post","link":"https:\/\/maddruid.com\/?p=15210","title":{"rendered":"[2800] What is the fiscal deficit status now?"},"content":{"rendered":"

Back in January, the official deficit projection for 2015 was revised up by the government to 3.2% of GDP from 3.0% due to the falling energy prices. I concluded then<\/a> the new target was achievable if government revenue would increase by at least 1.2% YoY. It was a reasonable target eight or nine months ago.<\/p>\n

Unfortunately,\u00a0a lot of things have happened since then\u00a0and that\u00a01.2% YoY revenue growth does not look easy anymore. That means,\u00a0the current deficit target seems incredible now.<\/p>\n

I have updated my sensitivity analysis. I think\u00a0the fiscal deficit this year will likely be around 3.5%-3.9% of GDP. I did a tighter projection for work but I can afford to cast a wider net here.<\/p>\n

Below is a table of deficit-to-GDP, dependent on revenue and NGDP changes this year. I have highlighted several\u00a0cells in red corresponding to\u00a0my expectations.<\/p>\n

\"2015<\/p>\n

The assumptions (projections?) are:<\/p>\n

    \n
  1. 0%-2% revenue contraction<\/li>\n
  2. 4%-5% NGDP growth.<\/li>\n
  3. For government spending growth, I imputed 1.2% YoY into my model, which is the exact increase\u00a0the government announced\u00a0from its budget revision back in January. I do not expect any spending cut due to… hmm… some political imperatives and I suppose, Keynesian tendencies within the government. I am unsure how the Monday announcement would affect spending as details are scarce so far but my gut feeling says it will not matter.<\/li>\n<\/ol>\n

    The weaker revenue is\u00a0mostly due to depressed\u00a0petroleum tax collection, lower petroleum royalties and lower dividend.\u00a0I am a bit unsure\u00a0how other taxes, especially company and individual income taxes, will change. But what we do have is the first half data and individual income tax collection is already down by 33% YoY, partly, I guess, because of the earlier tax cuts.\u00a0Company income tax collection rose strongly\u00a0however, increasing\u00a043% YoY but judging from earning reports so far, I\u00a0think the second half will\u00a0be very different.<\/p>\n

    The 1MDB Minister<\/del>\u00a0Prime Minister<\/del> Finance Minister will table the government budget on October 23. We will know more then.<\/p>\n

    \"Mohd\u00a0\"Mohd\u00a0\"Mohd<\/center>p\/s \u2014 It would be interesting to compare current assumptions with past ones:<\/p>\n
      \n
    1. My current expectation is based on 1.2% spending growth, 0%-2% revenue contraction and 4%-5% NGDP growth. These are part of the three assumptions listed above.<\/li>\n
    2. Back in January 2015 during the revised budget<\/a>, the assumptions were 1.2% spending growth, 1%-2% revenue growth and 4%-5% NGDP growth.<\/li>\n
    3. The original 2015 official projection, shared in October 2014<\/a>, was 3.2% spending growth, 4.5% revenue growth and 9% NGDP growth.<\/li>\n<\/ol>\n

      You can see the drastic change in projections and assumption since October 2014. Maybe a table will be clearer for comparison:<\/p>\n

      \"Malaysian<\/p>\n","protected":false},"excerpt":{"rendered":"

      Back in January, the official deficit projection for 2015 was revised up by the government to 3.2% of GDP from 3.0% due to the falling energy prices. I concluded then the new target was achievable if government revenue would increase by at least 1.2% YoY. It was a reasonable target eight or nine months ago. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10],"tags":[179,1520,43,1689],"class_list":["post-15210","post","type-post","status-publish","format-standard","hentry","category-economics","tag-fiscal-deficit","tag-government-revenue","tag-government-spending","tag-sensitivity-analysis"],"_links":{"self":[{"href":"https:\/\/maddruid.com\/index.php?rest_route=\/wp\/v2\/posts\/15210","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/maddruid.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/maddruid.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/maddruid.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/maddruid.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=15210"}],"version-history":[{"count":24,"href":"https:\/\/maddruid.com\/index.php?rest_route=\/wp\/v2\/posts\/15210\/revisions"}],"predecessor-version":[{"id":15247,"href":"https:\/\/maddruid.com\/index.php?rest_route=\/wp\/v2\/posts\/15210\/revisions\/15247"}],"wp:attachment":[{"href":"https:\/\/maddruid.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=15210"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/maddruid.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=15210"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/maddruid.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=15210"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}