BMI retains forecast budget deficit in line with govt projection

BMI Country Risk & Industry Research has retained its forecast for Malaysia’s budget deficit as a share of gross domestic product (GDP) to fall from 4.9 percent in 2023 to 4.3 percent in 2024, in line with the government’s fiscal projections.

The Fitch Solutions company said a quick outlook on the Malaysia Budget 2024 signalled a continued path towards fiscal consolidation.

“The budget also marks a positive step towards Malaysia’s medium-term goal of narrowing its budget deficit to 3.5 percent of GDP by 2025,” it said in a statement today.

BMI said the most significant announcements that accompanied the budget were a hike in the sales and services tax (SST) to eight percent in 2024 from six percent currently.

It also noted the implementation of a luxury goods tax of five to 10 percent on selected high-value goods and the introduction of capital gains tax on the sale of unlisted shares starting in 2024.

“The government expects these changes to generate an additional RM14.6 billion (0.7 per cent of GDP) in 2024,” it said.

BMI said that more broadly, total revenue is expected to rise by 1.5 percent to RM307.6 billion in 2024 (15.6 percent of GDP), of which the increase in tax revenue would help offset the decline in non-tax revenue.

“Non-tax revenue is projected to decline by 13.3 percent to RM74.2 billion due to reduced investment income receipts.

“Specifically, the government expects dividend income from Petronas to decrease from RM47.8 billion in 2023 to RMR39.7 billion in 2024,” it said.

On the expenditure side, BMI said the government projected a marginal 1.2 percent increase in operating expenditure to RM303.8 billion in 2024, while net development expenditure is projected to fall by 7.0 percent to RM90.0 billion in 2024 (4.6 percent of GDP).

“This forecast is in line with the Public Finance And Fiscal Responsibility Law passed on Oct 12, which stipulates that the country’s annual development spending must exceed three percent of GDP.

“Overall, total expenditure is projected to decline from a revised estimate of RM397.4 billion in 2023 to RM393.8 billion,” it said.

On Oct 13, Prime Minister Anwar Ibrahim, who is also the finance minister, tabled the proposed Budget 2024, which has RM393.8 billion in expenditure.

This translates into 19.9 percent of GDP in 2024, down from 20.2 percent of GDP in 2023.

RM303.8 billion was allocated to operating expenditure, with the remaining going to the development budget.

Overall, the government projects a budget deficit of 4.3 percent of GDP for 2024, narrowing from an estimated 5.0 percent in 2023.

- Bernama

Focus on reducing deficit aimed at boosting investor confidence - PM

I'm not against 'maha kaya' people - PM

Govt to remove subsidies gradually, says Treasury sec-gen

Opposition leader, PN MPs rap Anwar's ‘maha kaya’ narrative