Illustrative image (Photo: Internet) Hanoi (VNA) -The World Bank (WB) has said the Malaysian government needs to diversify andincrease its revenue resources, including widening coverage of the sales andservices tax (SST) to rebuild fiscal buffers.
In its October 2019edition on the Economic Update for East Asia and the Pacific, themed “WeatheringGrowing Risks”, released on October 10, the WB said exercises towardsdiversifying revenue resources are needed, as Malaysia’s comparatively highlevel of government liabilities would continue to exert constraints on fiscalspace available in the event of macroeconomic shocks.
The WB’s lead economist inmacroeconomics, trade and investment Richard Record said the challenge of thegovernment now is to widen coverage of the SST.
He also said thegovernment could introduce more progressive elements in its revenue policies,including a realignment of tax incentives and an expansion of personal incometaxes to rebuild fiscal buffers.
According to him, wideningthe SST coverage would lead to inflation in the country, and the exercise couldbe implemented when the inflation rate is comparatively low.
The government canidentify those items consumed most by the low-income group, and take measuresto protect them, he said.
The WB forecast thatMalaysia’s consumer price index will grow by 0.8 percent in 2019 and 1.7percent in 2020, and the country will meet its fiscal deficit target of 3.4percent of gross domestic product this year, supported by monetary measures.
On economic growthprospects, it said risks to Malaysia’s growth outlook continues to tilt towardsthe downside, mainly due to the US-China trade tensions and a maturing globaltechnology cycle, which could weigh on the country’s exports demand in the nearterm.
Overall, it maintainedMalaysia’s GDP growth at 4.6 percent this year./.
