The government will cut back on subsidies and social assistance for a second straight year, by 14.4% to RM52.6 billion (US$12.2 billion), according to a finance ministry report published just as Anwar begins to present the budget in Parliament. This is particularly the case for fuel and electricity subsidies.
Growth is set to quicken to within 4.5% to 5.5% next year, from a revised forecast range of 4.8% to 5.3% in 2024 on improved global trade, and robust domestic consumption. The 2025 projection largely exceeds a 4.6% expansion predicted by analysts surveyed by Bloomberg.
Revenue will rise by 5.5% next year, as a result, and this is set to help Anwar, who doubles as finance minister, target a narrower budget gap to 3.8% of gross domestic product (GDP), from 4.3% this year. Rebuilding fiscal health is key for Malaysia to retain emerging Southeast Asia’s highest credit score, and keep investors’ faith as Anwar looks to turn the nation into a global artificial intelligence hub.
“We have made significant strides in fiscal consolidation,” Anwar wrote in the preface of the Economic Outlook 2025 report.
“Our commitment to prudent debt management and the transition to targeted subsidies are central to fiscal reform.”
Malaysia’s debt-to-GDP ratio is projected to stay around 64% by the end of this year and 2025. Anwar’s administration has said in 2023 that it wants to reduce public debt to 60% of GDP within a five-year timeframe.
Anwar is counting on his reforms and the resilient economy to weather Malaysia through any geopolitical and market storms — as well as ensure his longevity after a revolving door of leaders since 2018.
The government will increase spending by 3.3% in 2025 to RM421 billion to account for higher operational expenditure, including civil servants’ wages and retirement pay. Development spending will remain the same as in 2024, at RM86 billion.
Some upward inflation pressure could emerge from anticipated policy measures, according to the report — the government plans to implement a new minimum wage rate while civil servants will see a pay bump that will roll out in phases. Inflation is forecast to average within 2% to 3.5% in 2025, from a lowered projection range of 1.5% to 2.5% this year.
Anwar plans to increase allocations for transport and housing development next year, after cutting back in 2024. New projects include constructions of a bridge and road in Sarawak, an additional lane for a portion of a major highway in Johor, and public housing.
The government will also establish an “infrastructure facilitation fund” for its cross-border special economic zone with Singapore that is located in Johor, and will set aside funds for the development of the Silver Valley Technology Park 1 in Perak. Both are aimed at attracting investment and boosting regional economic growth, according to the finance ministry report.