BMI Research, a Fitch solutions company, said a quick view outlook on 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% of GDP by 2025,” it said in a statement today.
In addition, BMI said the most significant announcements that accompanied the budget were a hike in the sales and services tax (SST) to 8% in 2024 from 6% currently, the implementation of a luxury goods tax of 5 to 10% on selected high-value goods and the introduction of a capital gains tax on the sale of unlisted shares starting 2024.
“The government expects these changes to generate an additional RM14.6 billion (0.7% of GDP) in 2024,” it stated.
BMI said that more broadly, total revenue is expected to rise by 1.5% to RM307.6 billion in 2024 (15.6% 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% 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 RM39.7 billion in 2024,” it said.
On the expenditure side, BMI said the government projected a marginal 1.2% increase in operating expenditure to RM303.8 billion in 2024, while net development expenditure is projected to fall by 7% to RM90 billion in 2024 (4.6% 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 3% 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, 2023, Prime Minister Anwar Ibrahim, who is also finance minister, tabled the proposed Budget 2024, which has RM393.8 billion in expenditure.
This translates into 19.9% of GDP in 2024, down from 20.2% 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% of GDP for 2024, narrowing from an estimated 5% in 2023.