HLIB Expects Budget 2025 To Balance Fiscal Discipline And GDP Growth

KUALA LUMPUR, Oct 2 (Bernama) -- Hong Leong Investment Bank Bhd (HLIB) expects Budget 2025 to responsibly walk the fiscal consolidation path, a lower fiscal deficit target from -4.3 per cent to -3.9 per cent, yet be supportive of gross domestic product (GDP) growth, subsidies savings and improved revenue channels.

In a note today, HLIB said new government revenue streams introduced this year should see its full-year impact in 2025 – these include higher service tax (2024: RM3.5 billion), taxes on low-value goods (RM0.2 billion), capital gains tax on unlisted shares (RM0.8 billion) and new e-invoicing measures (RM2 billion).

Additionally, it said that in 2025, a global minimum tax rate of 15 per cent will be implemented to align with international standards, while the previously postponed high-value goods tax (HVGT) might see a revival.

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“At the same time, we reckon the government will likely continue its subsidy rationalisation efforts, possibly involving further subsidy removal for electricity (2024: RM4.5 billion), expanding diesel subsidy rationalisation to include East Malaysia (2024: RM4 billion) and introducing subsidy targeting (as opposed to the current blanket nature) for RON95.

“Collectively, the savings from reduced subsidies and higher revenue are expected to fund the government’s targeted policy measures such as civil servants pay hike (ranging 16.8-42.7 per cent; costing circa RM10 billion) and cash handouts via Bantuan Sara Hidup (BSH) and Budi Madani,” it added.

HLIB said it projected development expenditure (DE) to come in at RM85 billion for 2025 as 2024’s amount is expected to be revised downwards from RM90 billion to RM80 billion, following lower outlays in the first half of 2024.

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“Similar to past budgets, we envision an increase in cash aid handouts - BSH – this coupled with recent measures such as the Employees Provident Fund Account 3 and impending civil servants pay hike should be positive for consumer retail and national auto marques.

“Gearing up for Visit Malaysia 2026 (record high 35.6 million tourist target), we expect a higher allocation for tourism to be beneficial for sectors such as aviation, brewers, Genting Bhd, healthcare and mall real estate investment trusts,” it said.

The investment bank said that taking the cue from the recent launch of Forest City Special Financial Zone, it is possible for some initiatives on the special economic zone to be announced during Budget 2025, which would be positive for property and construction.

“Apart from that, our other budget expectations include sustained elevated DE to benefit construction, higher healthcare allocation to attain its longer term five per cent of GDP target, expansion/extension of existing electric vehicle initiatives, review of the windfall profit levy on palm oil is plausible and no tax hike for the sin sectors (tobacco, brewers and gaming),” it added.

Budget 2025 will be presented to Parliament on Oct 18.

-- BERNAMA