KUALA LUMPUR, July 24 — Malaysia’s economy is experiencing faster-than-expected growth this year, potentially allowing Prime Minister Datuk Seri Anwar Ibrahim to postpone plans to cut blanket subsidies for RON95 gasoline, business news outlet Bloomberg reported.
Maybank Investment Bank Bhd’s chief economist, Suhaimi Ilias said Malaysia could still narrow its fiscal deficit to 4.3 per cent of GDP this year, even if the subsidy cuts are delayed to 2025.
“This is especially true if annual GDP exceeds the official 4 per cent to 5 per cent forecast, as that would translate to more revenue,” Suhaimi told Bloomberg.
Analysts at Citigroup Inc. have already raised their growth forecast for Malaysia to 5.2 per cent after the nation reported a quicker-than-anticipated expansion last quarter.
“The economy is essentially firing on all cylinders,” Suhaimi was reported saying.
He added that if the subsidy cuts are deferred to next year, Malaysia’s inflation would average closer to 2 per cent in 2024, compared to Maybank’s current estimate of 2.4 per cent.
According to the report Malaysia recently replaced blanket diesel subsidies with targeted assistance to save RM4 billion annually, resulting in a 56 per cent overnight increase in pump prices and public backlash.
June inflation is expected to have climbed to 2.2 per cent, according to a Bloomberg survey, the highest in over a year.
While the impact of unwinding RON95 subsidies would likely be more substantial, Anwar has not committed to a timeline, focusing instead on the smooth implementation of diesel reforms.
Analysts from Citigroup to RHB Investment Bank Bhd predict that the government might postpone the move to the end of this year at the earliest.
