KUALA LUMPUR, March 14 (Bernama) -- Malaysia’s budget deficit is forecast lower at 3.9 per cent for 2025, said BIMB Securities Sdn Bhd.
It said the reduction of fiscal deficit is a combination of higher revenue, prudent spending on operating expenditure (opex) and slightly lower development expenditure.
“Looking ahead, the fiscal deficit is predicted to reduce as per target in the Public Finance and Fiscal Responsibility Bill 2023,” it said.
The research firm said this under its shariah-compliant equity research note strategy thematic: Retargeting RON95 Subsidy - Go or No Go.
It said subsidy rationalisation for opex, potential widening of tax base for revenue and shifting towards the public-private partnership model for big infra and non-infra projects as mentioned in the Public-Private Partnership Master Plan 2030 (PIKAS 2030).
Meanwhile, inflation is seen to be at 2.0 per cent to 3.5 per cent in 2025 as the size of RON95 subsidy cut remained uncertain.
It said the Finance Ministry's inflation rate is projected at between 2.0 per cent and 3.5 per cent in 2025, partly due to a gradual shift towards targeted subsidy mechanisms especially for RON95 and diesel.
The rationalisation of RON95 subsidy is predicted to start by the middle of this year.
In 2024, average headline inflation rate was 1.8 per cent, way lower than the government’s initial Consumer Price Index (CPI) forecast of 2.1 per cent to 3.6 per cent for 2024 as mentioned in Budget 2024.
Excluding 2021 due to the pandemic factor, the inflation forecast range normally has a 1.0 per cent gap.
Non-food inflation rate averaged 1.6 per cent in 2024 (2023: 1.3 per cent) since only diesel subsidy was being rationalised under the fuel items.
The wide gap of inflation forecast for 2025 indirectly indicates uncertainty of RON95 subsidy cut size and price-level mechanism.
On the RON95 price, BIMB opined that it would be fully floated by July 2025 and 85 per cent of the population to receive cash assistance according to the Central Database Hub (PADU).
This would have a similar mechanism like the targeted diesel subsidy and the cash assistance goes through the Budi MADANI programme.
In its latest fiscal policy, the government has allocated RM12 billion for 85 per cent of the population.
"Based on our estimate, each person would receive RM33 per month and, if by household of four persons, RM133 would be distributed to each household per month," it said.
Besides, based on BIMB's estimates, the RON95 market price would be at RM2.83 per litre with Brent crude oil price at US$75 per barrel, if fully floated.
This is also based on a slight appreciation of US dollar-ringgit and a marginal dip of the average crude oil price in 2025.
“The expected price levels are important in this study and regarded as constant variables.
"We assume the global oil price to remain at an average of US$75 per barrel," it added.
-- BERNAMA
