- The Prime Minister tabled the Eleventh Malaysia Plan (11MP) yesterday, focusing on key strategies to bolster the economic fundamentals during the 11MP.

- Four main strategies for 11MP period include:- (i) unlocking the potential of productivity to ensure sustainable and inclusive growth; (ii) promoting investment to spearhead economic growth; (iii) increasing exports to improve trade balance; and (iv) enhancing fiscal flexibility to ensure sustainable fiscal position.

- The government has allocated about RM260bil for development expenditure under the 11MP, but it has not finalised the breakdown. Like all the previous plans, 50% of the development expenditure is usually allocated for infrastructure spending, 30% will go to social matters such as schools and healthcare facilities, while the rest will be for safety (security and general administrative expenses).

- Federal government’s financial position is likely to improve further on the back of the implementation of GST and efficient tax collection going forward. Federal government’s revenue is envisaged to grow from RM1.050tril in 10MP to RM1.408tril in 11MP. Revenue is targeted to expand by 7.9% per annum.

- Meanwhile, the government will be less dependent on petro-dollar revenue going forward. Oil-related revenue is likely to decline to 15.5% of total revenue by 2020 from 21.5% in 2015. On the other hand, GST will bring in an average of RM31.4bil revenue per year over the next five years compared to an average of RM15.5bil collected through the sales tax and services tax during the 10MP.

- Malaysia will continue to reduce the budget shortfall although a balanced budget by 2020 is out of reach. The Federal government is likely to reduce fiscal deficit from 3.2% in 2015 to 0.6% by 2020. Federal Government total debt will also fall from 53.3% of GDP to 43.5% by 2020.

- GDP is expected to expand by 5%-6% a year based on sustained domestic demand and increasing contribution from the external sector. Private consumption and investment will drive growth, resulting in a 7.9% per annum rise in gross national income (GNI) per capita.

- Malaysia aims to be a high income status economy with an estimated GNI per capita of about USD15,000 by 2020. Based on the 11MP target, GNI per capita will probably amount to USD15,690 in 2020, as average monthly household income increases from RM6,141 in 2014 to RM10,540 in 2020.

- GDP growth is expected to be underpinned by a significant increase in productivity, with less dependency on inputs from capital and labour. The economy will continue to maintain full employment rate and unemployment rate is likely to reduce to 2.8% by 2020. Also, labour productivity will be boosted from RM77,100 in 2015 to RM92,300 in 2020.

- Aside from that, the accommodative monetary policy and administrative measures will continue to ensure price stability in the years ahead. Inflation rate during 11MP will probably remain low, averaging at 2.5% to 3% per annum.

Source: AmeSecurities Research - 22 May 2015