Wednesday, December 22, 2010

3Q 2010 Government Revenue and Expenditure

Well, I’m back from my break, and catching up on events. In the meantime I’ll be getting rid of the backlog of posts that I’ve been meaning to do.

First up is 3Q numbers on the Federal Government’s expenditure and revenue. As intimated by the 3Q GDP numbers, there’s been further consolidation in government spending (sample: 2000:1 to 2010:3):


Apart from the obvious deficit, the other thing to note is that revenue is still well off its 2008 peaks. Having said that, it appears that both revenue and expenditure are more or less on their long term trend lines.

Direct taxes continue to be top of the heap (percentage shares):


…but you’ll note that non tax revenue has become a bigger contributor to government coffers over the years. Before you start thinking petroleum though, most of the increase has come from returns on investments – Khazanah, BNM and the like.

How does this performance compare to the 2010 budget allocation? Not too bad:

(RM Millions)

2010 Budget Allocation

2010 Actual (up to 3Q 2010)

Actual As Percentage of Allocation









Net Development Expenditure








One last thing I’d like to note is that forecast values of revenue and expenditure (inclusive development expenditure) suggest that the budget allocation numbers are way off. Using two simple regressions based off lagged nominal GDP (1 quarter and 4 quarters), I got the following results:

4Q 2010 Revenue: RM52,873-RM56,609 millions

4Q 2010 Total Expenditure: RM66,893-RM69,777 millions

Par for the course: apart from the revenue shortfall in 2009, over the last decade the government has consistently exceeded budget estimates by around 10%.

In this case, while the extra revenue will be higher than expenditure in percentage terms, the likely result will be the government almost exactly hitting its deficit target at RM40 billion. Scaled to GDP though, this translates to a slightly lower deficit of –5.2%, as against the 2010 budget target of –5.6%, as higher growth has increased the denominator.

Technical Notes:

Revenue and Expenditure data from BNM’s October 2010 Monthly Statistical Bulletin

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