SUMMARY

• Budget 2024, slated to be table this Friday, 13th October, by YAB Dato’ Seri Anwar Ibrahim, Prime Minister and the Minister of Finance, is set to translate the Malaysia MADANI economic framework and to accelerate the 12th Malaysia Plan (12MP) (2021-2025) Mid-Term Review (MTR).

• Government is expected to project a higher GDP growth target in 2024, potentially between 5.0% and 5.5% (MoF 2023F: 4.5%), in line with its growth target set under the recently tabled 12MP MTR. Our current base target for GDP growth is 4.9% (2023F: 3.5% - 4.0%), barring unforeseen external shocks to the growth outlook.

• Given the optimistic fiscal deficit target set under the 12MP MTR and MTFF 2023-2025, the government may announce a fiscal deficit target of 4.6% (MoF 2023F: 5.0%) while we remain conservative, targeting between 4.5% and 5.0% (2023F: 5.0% - 5.2%) amid a challenging global economic outlook in 2024.

• The implementation of new taxes (capital gains tax, luxury tax, etc), coupled with the government's efforts to tighten tax loopholes through necessary measures and the potential reintroduction of GST may boost revenue in 2024.

• Oil-related revenue is expected to remain stable in 2024, supported by a favourable outlook for Brent crude oil price with official forecast expected to remain above USD80.0 per barrel (bbl), driven by increasing global oil demand, extended supply cuts by OPEC and rising geopolitical tensions.

• Despite our expectation of a lower dividend collection from PETRONAS, the potential implementation of a multi-tiered levy mechanism for low-skilled foreign labour may help to compensate potential losses in non-tax revenue collection.

• New Central Database Hub (PADU) will be introduce to eliminate blanket subsidy especially on subsidised RON95 and diesel as well as to increase social assistance package through Sumbangan Tunai Rahmah (STR) program.

• Government may increase the wages for public servants and the introduction of Progressive Wage Modelling (PWM) slated in 2Q24 to facilitate salary increment, rising workers’ productivity and to cater the issues of rising cost of living.

• Development expenditure is expected to focus on elevating socioeconomic development to provide conducive conditions for economic growth. Infrastructure for transport, education, health care, and telecommunications networks will be the focus of development in order to lift national prosperity.

• We expect no new megaprojects to be announce, instead, there will be a revival and acceleration in existing projects. Better public transport connections and accessibility are expected to be reflected in this upcoming budget.

Source: Kenanga Research - 9 Oct 2023