KUALA LUMPUR, Dec 16 — Hong Leong Investment Bank (HLIB) expects the development expenditure (DE) to be scaled down from RM95 billion under the previous Budget 2023 to RM85 billion as Prime Minister Datuk Seri Anwar Ibrahim has signalled for more transparency and lower leakages.
In its market view note, HLIB said Anwar has ordered a review of RM7 billion worth of approvals under the RM15 billion flood mitigation project that was conducted via direct negotiations instead of a tender process.
“Hypothetically, should the DE be reduced by our postulated quantum, the fiscal deficit target for 2023 would lower from -5.5 per cent to -4.9 per cent.
“Broadly, a reduction in DE is negative for construction. There is a 77 per cent correlation between DE and nominal construction Gross Domestic Product (GDP),” it said.
HLIB expects the new Budget 2023 to be re-tabled between January and February next year following the dissolution of Parliament three days after the Budget 2023 was tabled on Oct 7.
The investment bank also foresees that the new Budget 2023 would address the rising cost of living, especially for the lower income group, as Anwar emphasised that subsidies must be targeted rather than a blanket which also benefits the rich.
HLIB highlighted three key items to which blanket subsidies currently apply, which have the potential to move to a targeted mechanism - namely, ceiling price for RON95 and diesel, electricity tariffs and cooking oil.
“However, as most political parties in this unity government are similar to the pre-15th General Election (GE15), chances are that the changes won’t be too drastic.
“Continued cash handouts is almost certain, although increasing its allocation could prove challenging given the tight government coffers,” it said.
As the unity administration is still in its early days, HLIB said unpopular moves involving subsidy rationalisation that directly hit the rakyat are unlikely to be featured in the budget but some signalling is probable.
It said initiatives for the property sector would probably be targeted for the B40 and M40 buyer group, while further extensions on the benefits accorded to electric vehicle (EV) buyers is very likely.
“We believe a tax or excise hike can be averted for casinos, number forecast operators (NFOs) and tobacco. We view the special draw cuts for NFOs as an isolated case rather than a prelude to more witch-hunting for sin stocks.
“On the environmental, social and governance (ESG) front, we may see details on carbon tax, incentives for more renewable energy capacity and a push for higher female board representation,” said HLIB. — Bernama
