Thursday, December 13, 2012

3Q 2012 Federal Government Finance

Just a quick update on the numbers – more for my own records and conscience than anything else.

Up to 3Q2012, the government has received 72.7% and spent 69.4% of the 2012 budget based on the latest estimates published two months ago (RM millions):


The budget deficit over the first three quarters of 2012 has averaged a little under RM7.5 billion a quarter, higher than the average RM5.7 billion from the same period in 2011 but substantially lower than the RM10.6 billion average for the full year in 2011.

Revenue growth averaged 9.4% while total expenditure climbed 11.8% – both  numbers are below the 2011 full-year growth figures (16.1% and 12.3% respectively).

If the latest estimates turn out to be accurate however, 4Q 2012 GDP are going to get a boost from public spending – the deficit is slated to hit RM19.9 billion in the quarter. That’s pretty high net spending, though well off 4Q2011’s RM25.4 billion.

Just in case you’re wondering, this 4Q jump in public spending isn’t unusual. It’s the usual case of, “We have to spend what we budgeted for, or we can’t justify asking for more next year”. You can’t even blame government inefficiency for this, as this motivation is fairly common in the private sector as well.

Somewhat ironically, I really don’t think the higher 4Q deficit number will translate into higher 4Q growth, as it suffers in comparison with last year’s record deficit number. In other words, the base effect rears its ugly head and might take 0.5% or more off trend growth.

Digression: It’s somewhat painful to read in analysts statements and media reports that next year’s deficit adds on to GDP growth (or for that matter this year’s deficit to this year’s growth). That’s a fundamental error in calculation – for growth contribution, it’s not the level of the deficit that matters, it’s the change in the deficit. Since the deficit has been steadily coming down since 2009, the growth contribution has ipso facto been negative. End digression.

Technical Notes:

All data from the October 2012 Monthly Statistical Bulletin from Bank Negara Malaysia


  1. hi Hisham,
    I came across the following statistics recently.

    Current debts (to GDP) situation in Malaysia:
    Corporate 116% (4th highest in the world)
    Household 76.6% (2nd highest in Asia)
    Public 52%
    By adding them together, it is 244.6% of GDP

    By comparison, China(corporate + household + public) = 211% of GDP.
    There have been reports in the media stating that the current economic situation in China is not sustainable. But Malaysia's economic conditions seem worse than China's.
    Is this a cause for concern in the mid term i.e 3-5 years?

    1. Can you provide a source for these statistics?

      One concern I would have is that simple aggregation of debt totals doesn't make a whole lot of sense as many of these claims are against the other sectors in the economy. That would make total debt pretty much an empty concept.

      Even if that were the case, China's "unsustainability" is in reference to 8% growth, not its debt situation. Second, if the total for Malaysia is true (the corporate debt figure feels too high to me), that would put us below Canada, Germany and South Korea which isn't exactly bad company to be in.