KUALA LUMPUR, Oct 17 — BMI Country Risk & Industry Research (BMI), a Fitch solutions company, has retained its forecast for Malaysia’s budget deficit as a share of gross domestic products (GDP) to fall from 4.9 per cent in 2023 to 4.3 per cent in 2024, in line with the government’s fiscal projections.

It said a quick view outlook on the Malaysia Budget 2024 signalled a continued path towards fiscal consolidation.

“The budget also marks a positive step towards Malaysia’s medium-term goal of narrowing its budget deficit to 3.5 per cent of GDP by 2025,” it said in a statement today.

BMI said that the most significant announcements that accompanied the budget were a hike in the sales and services tax (SST) to eight per cent in 2024 from six per cent currently, the implementation of a luxury goods tax of five to 10 per cent on selected high-value goods and the introduction of capital gains tax on the sale of unlisted shares starting 2024.

“The government expects these changes to generate an additional RM14.6 billion (0.7 per cent of GDP) in 2024,” it said.

BMI said that more broadly, total revenue is expected to rise by 1.5 per cent to RM307.6 billion in 2024 (15.6 per cent of GDP), of which the increase in tax revenue would help offset the decline in non-tax revenue.

“non-tax revenue is projected to decline by 13.3 per cent to RM74.2 billion due to reduced investment income receipts.

“Specifically, the government expects dividend income from Petronas to decrease from RM47.8 billion in 2023 to RMR39.7 billion in 2024,” it said.

On the expenditure side, BMI said the government projected a marginal 1.2 per cent increase in operating expenditure to RM303.8 billion in 2024, while net development expenditure is projected to fall by 7.0 per cent to RM90.0 billion in 2024 (4.6 per cent of GDP).

“This forecast is in line with the Public Finance And Fiscal Responsibility Law passed on Oct 12, which stipulates that the country’s annual development spending must exceed three per cent of GDP.

“Overall, total expenditure is projected to decline from a revised estimate of RM397.4 billion in 2023 to RM393.8 billion,” it said.

On October 13, 2023, Prime Minister Anwar Ibrahim, who is also Finance Minister, tabled the proposed Budget 2024, which has RM393.8 billion in expenditure.

This translates into 19.9 per cent of GDP in 2024, down from 20.2 per cent of GDP in 2023.

RM303.8 billion was allocated to operating expenditure, with the remaining going to the development budget.

Overall, the government projects a budget deficit of 4.3 per cent of GDP for 2024, narrowing from an estimated 5.0 per cent in 2023. — Bernama