Budget 2024 cemented PM Anwar’s commitment to credibly strengthening Malaysia’s fiscal position in the medium-term. The government stayed true to its fiscal consolidation agenda in setting the 2024 budget deficit at a narrower 4.3% of GDP versus 5.0% in 2023.

In order to achieve the narrower deficit, the budget introduced numerous tax initiatives. These include a capital gains tax for the disposal of unlisted shares based on net profit at 10% (from 1 March 2024), an increase in the services tax rate to 8% from 6%, higher excise duty on tobacco and sugary drinks and a proposal to enact a 5-10% luxury tax. Importantly, the government pushed ahead with plans to introduce targeted fuel subsidies. Budget 2024 estimates that subsidies and social assistance spending will be ~18% lower than in 2023.

Given the government’s fiscal consolidation agenda, inflation is estimated to be within a wider range of 2.1-3.6% next year. GDP growth for 2024 is expected between 4-5%, in line with our forecast of 4.2%.

Budget 2024 also underscored the government’s commitment to supporting small and medium-sized enterprises, strengthening the education to labour market connections and pushing ahead with its energy transition plans.

In conclusion, Budget 2024 walked the talk in terms of establishing the government’s path to better fiscal health over the medium-term.