KUALA LUMPUR, Dec 15 ― RHB Investment Bank Bhd (RHB IB) expects some rationalisation in the government operating expenditure (opex), while a more targeted approach towards subsidies may be implemented in the revised Budget 2023.

"In view of the still-elevated living costs and inflationary pressures, the pace of the adjustment is likely to be gradual,” it said in a note titled "Global Economics and Market Strategy” today.

The investment bank also said the potential revision of the development expenditure allocation might be possible, especially for new and existing projects that have yet to start the tender process.

"Any major changes to Budget 2023 might have a significant impact on our fiscal deficit projection,” it said, adding that it maintained its 2023 fiscal deficit projection at 5.5 per cent of the gross domestic product (GDP) for the time being.

To recap, the biggest-ever Budget 2023 totalling RM372.3 billion was tabled on October 7, 2022, whereby RM272.3 billion has been allocated for opex and RM95.0 billion for development expenditure.

However, the budget was not debated as the Parliament was dissolved three days later, on October 10, to make way for the 15th general election on November 19, 2022.

On December 5, newly appointed Prime Minister Datuk Seri Anwar Ibrahim said the federal government will be tabling the motion for the payment of emoluments for 2023 in the Dewan Rakyat on Dec 19, and Budget 2023 will be reviewed.

"I think most of it is acceptable,” Anwar was quoted as saying.

Moving forward to 2023, RHB IB said it is cautiously optimistic about the country's economic outlook and has maintained its 2023 GDP growth forecast of 4.5 per cent year-on-year (y-o-y) as it expected the growth to be supported by resilient domestic demand.

It has also maintained its headline consumer price index inflation projection for 2023 at three per cent y-o-y, driven by economic growth momentum, fuel subsidies outlook, and the movement of commodity prices.

The investment bank has retained its overnight policy rate forecast range at 3.0-3.5 per cent for 2023, anchored by factors such as a robust domestic economy, resilient inflationary pressures, as well as a potential relaxation of fuel subsidies. ― Bernama