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Former prime minister Najib Abdul Razak has claimed that a report by the think tank Fitch Solutions Macro Research has vindicated his analysis on Pakatan Harapan’s economic performance.

Among others, he highlighted that the report said the 2019 Budget proposal’s reliance on oil revenue poses a risk to the government’s efforts to fiscal consolidation.

In addition, he pointed out that Fitch Research sees the government’s projection of a 4.9 percent gross domestic product (GDP) growth next year as too optimistic.

Instead, it projected that GPD growth would average 4.4 percent per year over 2019 to 2024, instead of the government’s projection of about five percent.

“Fitch said it, not Najib, although I have given the same warnings and analyses over the past few months.

“The Pakatan Harapan government is trying to give the impression that everything is okay, but in reality, the outcome of their ‘prowess’ in running the country is a worsening of the country and the economy.

“The claim that ‘everything will be better once Najib is toppled’ is just a lie and is absolutely untrue. The only thing that has got better is the millions in salary that ministers earn today,” he said in a Facebook post late last night.

In his posting, Najib also highlighted that Fitch Research is maintaining its forecast that the budget deficit next year would be 3.7 percent of the GDP, although the government has announced plans to trim it to 3.4 percent.

He also quoted the report saying that the Malaysian economy facing a slowdown, and is vulnerable to shocks from an increasingly uncertain external environment.

'Report produced independently'

Fitch Solutions is affiliated with the rating agency Fitch Ratings Inc, but says its report is produced independently without any input from Fitch Ratings.

Other points mentioned in the report, but not quoted by Najib, include the prediction that the government’s additional tax measures will not yield much income.

Referring to the proposed tax on sweetened drinks and international flights in particular, it said, “Taken together, both measures would gross an amount less even than a tenth of a percentage point of annual GDP as of Q218 in revenue.”

It also noted that the government has made meaningful cuts on subsidies, but is risking its popularity in doing so, and it remains to be seen whether the government would stay its course as its popularity slides.

The report said that while the 2019 Budget is significantly larger than the 2018 Budget, most of the increase is due to the government’s plan to fork out RM37 billion to pay for arrears in GST and income tax refunds.

“Excluding tax refunds, which is likely to be one-off, the budget is in fact, 4.4 percent smaller than 2018’s at RM277.6 billion.

“Expenditure items that saw the most direct cuts were ‘Supplies and Services’ (20.4 percent cut to RM29.1 billion) and ‘Subsidies and Social Assistance’ (20.8 percent cut to RM22.3 billion),” it said.

It said the reduced subsidies are largely due to plans to put fuel prices back on a managed float and to reduce Bantuan Sara Hidup direct cash transfers.

As for the “Supplies and Services”, it said the government had said the reduction is due to the reclassification of certain times “related to capital investment” and “reprioritisation of projects”.

“However, without further details, it is difficult to accurately determine how much of this was due to cost savings,” the Fitch Research report said.