SINGAPORE (Standard & Poor's) Oct. 28, 2013-Standard & Poor'sRatings Services said today that the Malaysian government'sproposed 2014 budget has no impact on the sovereign ratings andoutlook on Malaysia (foreign currency A-/Stable/A-2; local currency A/Stable/A-1; axAAA/axA-1+).
The budget targets a deficit of 3.5% of GDP for 2014, downfrom 4% in 2013. This is in line with our expectations of agradual fiscal consolidation over the medium term.
The government has scheduled the much-anticipated Goods andServices Tax to take effect in April 2015 at 6%. The tax allowsthe government to diversify its revenue base. But we expect therevenue impact of the new tax to be neutral for at least thefirst few years because of other revenue-reducing measuresannounced in the budget.
In our view, Malaysia's slow fiscal consolidation stemmedfrom its relatively weak revenue structure and an inability toreduce high subsidies. Budget 2014 and 2015 could begin toreduce concerns arising from these issues.
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