KUALA LUMPUR (May 22): The federal government's fiscal deficit shrank by 17% in the first quarter of 2025 (1Q2025), backed by improved tax collections and reduced subsidy spending, according to the Ministry of Finance (MOF).

The quarterly deficit decreased to RM21.9 billion, compared with RM26.4 billion in the same period last year, the MOF said in a statement containing key highlights from Malaysia's 1Q2025 Economic Report published by the ministry on Thursday.

The report noted that revenue logged by the federal government increased by 3% year-on-year to RM72.1 billion from RM70 billion, driven by a surge in sales and service tax receipts, and stronger individual income tax collection.

Total federal expenditure contracted by 2.5% to RM94.2 billion, mainly due to lower subsidy spending amid the diesel subsidy retargeting programme, coupled with lower global oil prices.

Despite the reduction in spending, the MOF noted that the government is continuing with its targeted social aid schemes, including Sumbangan Tunai Rahmah (STR), Sumbangan Asas Rahmah (Sara), the fish landing incentive and the paddy price subsidy.

“In addition, grants to statutory bodies were optimised due to operational efficiency and effectiveness of the agencies,” it said.

As at end-March 2025, the federal government’s debt stood at RM1.28 trillion, or 62.6% of gross domestic product (GDP). Of this total, 97.8% comprised domestic debt, while offshore borrowings accounted for only 2.2%.

Malaysia’s GDP growth has moderated to 4.4% in 1Q2025, marking three consecutive quarters of slowdown since 2Q2024, when a 5.9% growth was recorded. In 2024, the country recorded a 5.1% GDP expansion.

The 1Q2025 Economic Report can be accessed at the MOF’s official website.