Budget 2025 To Maintain Balanced Approach For Economic Development -- RHB IB

KUALA LUMPUR, Sept 24 (Bernama) -- Budget 2025, to be tabled in the Dewan Rakyat on Oct 18, is expected to strike a balanced approach, combining fiscal sustainability with initiatives to drive economic development, said RHB Investment Bank (IB) Bhd.

The investment bank said the budget is likely to address immediate economic needs, including enhancing fiscal sustainability and strengthening the social safety net, while also laying the groundwork for future growth.

Central to its strategy will be an emphasis on infrastructure improvements, fostering innovation and supporting key industries.

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“With reference to recent developments, we anticipate four key prongs that may be addressed in Budget 2025, including fiscal responsibility and debt management, economic stimulus and infrastructure development, social welfare and inclusivity, and lastly, the business and investment climate,” it said in a research note today.

Regarding macroeconomic projections, the bank expects gross domestic product (GDP) growth to remain within a range of 4.0 per cent to 5.0 per cent, with inflation targeted between 2.5 per cent and 3.5 per cent.

Additionally, RHB projects GDP growth at around 4.7 per cent for 2025, compared to 5.0 per cent in 2024, supported by export-oriented sectors such as electronics and electricals, energy and metal goods.

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"We maintain a positive outlook on the economy, based on robust global prospects, the continuation of multi-year catalytic projects, resilient household and business spending and a gradual implementation of fiscal consolidation efforts," it said.

Domestically, the bank remains optimistic about Malaysia's private consumption growth, buoyed by strong labour market conditions.

It said continued expansion in consumer spending and improved tourism activities are expected to bolster growth in the services sector, particularly in accommodation and restaurants.

Meanwhile, RHB IB's inflation projection stands at 2.7 per cent, up from 2.1 per cent in 2024.

The bank stated that the inflation trajectory will depend on the timeline for RON95 subsidy rationalisation and the magnitude of price adjustments, potential demand increases from partial pension fund withdrawals, and spillover effects from rising global commodity and food prices.

"A planned increase in civil servant salaries (effective Dec 2024) could also increase demand-pull inflation pressures," it said.

RHB IB anticipates some form of fiscal consolidation measures to be introduced in Budget 2025, including revenue enhancements and expenditure rationalisation.

Fiscal resources are expected to be allocated in a more targeted manner, prioritising essential areas.

For 2024, the bank believes Malaysia is on track to achieve its fiscal deficit target of 4.3 per cent of GDP, compared to 5.0 per cent in 2023, in line with the government's commitment to fiscal strengthening and consolidation.

It noted that the recent implementation of a diesel price float in Peninsular Malaysia would supplement existing fiscal consolidation measures, such as revisions to the services tax and utility tariffs, which are expected to improve the fiscal position relative to 2023.

“We expect that higher revenue collection will be achievable for 2024, supported by increased company and individual tax collection proceeds amid improved economic prospects and a broader tax base, coupled with enhanced efficiency,” the bank added.

-- BERNAMA