According to the Malaysian Institute of Economic Research (MIER), the net current account balance of the BOP has also improved, recording a surplus of RM26.7 billion in the first half of 2021.

“This surplus was approximately 3.6% of nominal gross domestic product (GDP), higher than 2.5% in the corresponding period last year,” it said in its Malaysian Economic Outlook third quarter 2021 report released today.

The research institute said the current account of the BOP is expected to improve further in the next two quarters of this year, continuing the recorded surpluses in the previous years.

“Meanwhile, the financial account balance which declined by approximately two times is expected to improve, registering a smaller deficit due to expected higher net inflows of both foreign direct investment and foreign portfolio investment.”

It said this would augur well for the Malaysian economy on the external front, helping to improve investor sentiments both at home and abroad.

On the domestic front, MIER said the federal government was struggling to ensure a continued current account surplus of its financial position.

“The current balance could possibly turn to a deficit, which is a very rare event, in view of the fact that the current account balance needs to be in surplus.

“Revenue collection must always cover operating expenditure as a rule of thumb for prudent management of public finance,” it said.

MIER said continuing higher operating expenditure, especially for emoluments and debt service charges and moderate revenue collection, would see net borrowings continue to increase to support higher net development expenditure as allocated in the 2021 budget and the upcoming 2022 budget.

“Taking into account expenditure on the Covid-19 fund, which is substantially high to ensure that public health receives utmost priority in the current tough environment, the overall deficit of federal government finance is expected to continue rising, moving closer to 6% of nominal GDP this year,” it added.