Minister: Next year's deficit will be well below 7.6pc

MALAYSIA'S budget deficit in 2010 will be "well below" this year's level as the government trims spending and seeks ways to increase revenue, Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah said.

The government is reducing the shortfall now so that it can afford to increase spending later should the world economy slow again, Ahmad Husni said in an interview in Istanbul on Tuesday, where he is attending the annual meetings of the World Bank and the International Monetary Fund. He is "cautiously optimistic" about growth prospects next year.

"We are ready for a W-shaped recovery," Ahmad Husni said. If it materialises, after "cutting the budget deficit, we have room for" higher expenditure.

Malaysia's economy is forecast to contract as much as 5 per cent this year as the world recession slashes exports, spurring the government to boost spending and increase its deficit to 7.6 per cent of gross domestic product in 2009. The central bank predicts the economy will resume growth this quarter after slipping into a recession in the first half.

The government will have a smaller contribution to growth next year as spending decreases, Ahmad Husni said.

"The private sector is ready to pick up the slack," he said. "We can already see the momentum in terms of rising investment and loans from banks are growing."

Prime Minister Datuk Seri Najib Razak is easing investment rules to attract funds into the country. The government is seeking ways to widen its tax base and increase its takings even as it reduces operating expenditure, Ahmad Husni said.

That includes studying the government's assets such as properties and finding ways to earn revenue from them, he said, declining to provide details.

"We are evaluating the total size of land and properties owned by the government that we can privatize and monetise," he said. - Bloomberg