Days after securing a stunning election victory, Malaysian Prime Minister Mahathir Mohamad’s government has delivered a potentially risky fiscal maneuver by replacing the goods along with service tax (GST) which has a sales along with service duty.
The Ministry of Finance said This particular week in which in which will lower GST to zero percent through June 1 along with reintroduce a sales tax to offset any shortfall in revenue. Rising oil prices — a positive for net energy exporters such as Malaysia — will also support revenues, officials stated.
although some analysts aren’t convinced.
When combined with the return of cash handouts, fuel subsidies — promises made by the current administration — as well as the country’s large levels of external debt along with low reserves, the sales tax isn’t too comforting, said Hamish Pepper, head of forex along with emerging market macro strategy research for Asia at Barclays.
“We could be looking at a fiscal deficit for Malaysia next year as much as 4.3 percent of GDP,” he warned, which could be a major spike through 2017’s 3 percent figure. “Sit in which within the context of government debt to GDP, which will be above 50 percent,” along with the final picture will be concerning, he continued.
The degree of fiscal deterioration post-election will be the primary factor for foreign investment, Pepper stated. along with while in which’s too early to draw any conclusions, “in which’s very much within the hands of the government to do the right thing for investors along with ratings agencies,” he added.
If GST was abolished “without adjusting measures,” in which could be a credit negative for the country, according to Moody’s Investor Services.