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Financial Outlook

Real GDP growth picked up in the third quarter and was projected to reach about 4.5% by the end of 2013, according to an IMF report published in December 2013. The organization believes the recovery will continue in 2014, supported by a pickup in private investment and stronger exports, which will more than offset the impact of fiscal consolidation. The IMF estimated that the current account surplus narrowed to about 3.5% of GDP in 2013 and would remain around this level in 2014. Underlying inflationary pressures were subdued, but a phased reduction of fuel subsidies will contribute to a small rise in inflation, which the IMF estimated at 2% in 2013 and is forecast to rise to nearly 3% by 2014. The IMF anticipated a fiscal deficit of 4% of GDP in 2013 but believes that the government could reduce the shortfall to 3.5% in 2014. In its 2014 budget the government announced a goods and services tax of 6% to take effect in April 2015; the aim of this tax, which replaces the previous sales and services tax, is to contribute to reducing the federal deficit to 3% by 2015 and to about zero by 2020.

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Further reading on Malaysia

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