1Q 2011 Fiscal Policy Update

If ever there was two remarkably different pictures portrayed by a single set of data, before and after seasonal adjustment, government revenue and expenditure in 1Q 2011 is as good an example as any.

Here’s the unadjusted, raw data, as officially released (RM millions):

Nothing too exciting here, as revenue and expenditure typically fall in the first quarter of every year anyway. The fiscal balance has improved, but again that’s fairly typical of first quarter government numbers.

Seasonally adjusted data shows something else entirely (RM millions):

Both revenue and expenditure jumped. I was expecting to see improvement in revenue this year, but this was a lot more than I thought it would do. The improvement in revenue came from about a 50/50 split between higher tax receipts from corporations, and a jump in the petroleum income tax i.e. Petronas. Expenditure’s a more interesting story as the increase came from about an even split between higher pension/gratuity payments, debt servicing, supplies and services (aka contracts), and grants; plus a double helping of subsidies, which rose by RM2.3 billion to nearly RM5 billion.

Up to this stage, operating expenditure is right on the budget target, though revenue’s not quite there yet – understandably because the bulk of collection is usually in the middle of the year when personal and corporate income tax returns are filed. Development expenditure is a little behind schedule – but again that’s typical because most of that spending comes in at the end of the year.

Despite the increase in expenditure, it looks like the slant towards fiscal consolidation is continuing, at least insofar as revenue and spending are concerned. Debt is another story entirely.

Technical Notes:

Government revenue and expenditure data from the Bank Negara’s April 2011 Month Statistical Bulletin.