-  Malaysia's government tabled a bill in parliament on Monday requesting approval for a supplementary budget worth RM4.1bil for 2014.

-  The requested amount for the supplementary budget for 2014 is less than a third of last year’s supplementary bill of RM15.0bil.

-  Dewan Rakyat commenced the second meeting for 2014 yesterday. Meanwhile, Dewan Negara will begin a six-day meeting from 23 July to 1 July.

-  As such, the approval of supply bill and details of the bill will be available by 1 July when Dewan Negara concludes its meeting.

-  For 2014, the government projects a fiscal deficit of 3.5%, which is equivalent to a budget shortfall totalling RM37.1bil.

-  Note that the total budget allocation is RM264.2bil (or +4.2% YoY) while total revenue is expected to improve by 5.0% YoY to RM224.1bil in 2014.

-  We expect the overall fiscal position to remain in check provided that the supplementary bill is backed by a stable stream of revenue.

-  However, budget shortfall could potentially stretch to 3.9% in 2014 if expenditure rises without an increase in revenue.

-  Aside from that, the request for supplementary budget for 2014 raises question as to whether a part of the budget will be allocated for subsidies.

-  For 2014, the budget allocation for subsidies is RM39.4bil, which is a reduction of RM3.9bil from a year ago (or -9.1% YoY).

-  As a recap, Deputy Finance Minister Datuk Ahmad Maslan tabled a supplementary budget for 2013 just weeks before the tabling of 2014 Budget last year.

-  For 2013, the bill seeks an additional RM14.125bil for services expenditure and RM888.5mil for charged expenditure.

-  Despite the increase in budget for 2013, fiscal deficit came in at 3.9% in 2013, which was better than the government’s target of 4.0%.

-  Going forward, the government is expected to further strengthen its fiscal stance and to achieve its target of a balanced budget by 2020.

Source: AmeSecurities