Published on 07 Oct 2022.
Given the various support measures incorporated, Budget 2023 is viewed as appropriate to support the economy. With a notable allocation of RM372.3 bil, the Budget includes measures such as income tax cuts and cash handouts which will help buoy demand next year. The Government’s growth target of 4.0%-5.0% is seen as realistic and will be mainly supported by domestic demand amid softer global activity.
The Government expects to collect a reduced amount of fiscal revenues next year at RM272.6 bil (2022e: RM285.2 bil) as the smaller PETRONAS dividend more than offset increases in tax revenue. Operating expenditure will fall to RM272.3 bil (2022e: RM284.7 bil) on account of a smaller allocation for subsidies and social assistance amid expectations of lower commodity prices and the rollout of targeted subsidies. Meanwhile, development expenditure will rise to RM94.3 bil (2022e: RM71.2 bil) amid higher spending on the economics sector partially due to the commencement of new infrastructure projects.
Malaysia continues to undertake a gradual fiscal consolidation path with the fiscal deficit projected to narrow to 5.5% by end-2023 (2022e: 5.8%) in line with reaching the targeted 3.5% by 2025 set under the 12th Malaysia Plan. Government debt is estimated to remain hefty at RM1.14 tril (63.0% of GDP). This raises some concern as fiscal space is constrained, with debt-servicing costs remaining significant at 16.9% of revenue in 2023.
Nur Nadia Mazlan
(603) 3385 2513
Tho Li Ming
(603) 3385 2511
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