Budget 2024: Delivering on reform promises

16 October 2023


  • Budget 2024 allocated RM394bn to achieve Madani Economy goals
  • Emphasis on fiscal resilience for long-term sustainability to uplift socioeconomic developments
  • Government’s 2024 GDP growth projected at 4.0%-5.0% with lower budget deficit of 4.3%
Fiscal resilience is prioritized

Budget 2024 entails a total expenditure of RM394bn as Malaysia strives to deliver inclusive and sustainable economic growth. Notably, 2024 development expenditure is expected to increase by 8% to RM90bn (excluding US$3bn 1MDB bond redemption in 2023 base) while operating expenditure is projected to increase by 1.2%, mirroring the projected revenue growth of 1.5% in 2024. We take cognizance of the lower 2024 PETRONAS dividend of RM32bn, compared to RM40bn in 2023 and RM50bn in 2022 as well as fiscal reform measures such as broadening tax revenue and subsidy rationalisation, reflecting government’s commitment for long-term fiscal sustainability. Therefore, 2024 budget deficit is expected to fall to the lowest since 2019 at 4.3% (vs 5.0% in 2023). As at Dec 2022, government debt accounted for ~62% of our gross domestic product (GDP), compared to 60% in Dec 2021.

Balancing needs to address Rakyat’s high cost of living and ballooning subsidies

Budget 2024 marks a critical milestone to deliver on the government’s reform initiatives, encompassing the key strategies laid out in the recently tabled 12th Malaysia Plan Mid-Term Review. Diesel subsidies will be rationalised while ceiling prices on chicken and eggs will be removed to allow prices to float. Targeted subsidy for petrol is expected to be implemented in phases in 2024 with some of the savings channelled to the allocation for Rahmah Cash Aid (STR) of RM10bn in 2024 (vs RM8bn in 2023), benefitting 9m recipients (vs 8.7m). For revenue base expansion, some of the new taxes introduced are capital gains tax on unlisted shares, luxury goods tax as well as higher rates for service tax at 8% (from 6%) and sugar sweetened beverages. In short, the government has clearly showcased its commitment toward fiscal sustainability which will bode well for Malaysia’s long-term development.

Growth strategies under Madani Economy Framework

Budget 2024 reaffirms the long-term strategies under the National Energy Transition Roadmap (NETR) and New Industry Masterplan (NIMP) 2030 with various tax incentives provided such as RM50k tax deduction for ESG-related expenses, enhanced green technology tax incentives and tiered investment tax allowance to attract investment in high-growth high-value industries. SME development is also emphasized with ample financial facilities offered and RM900m loan funds for automation and digitalisation. In addition, mega projects such as RM10bn Penang LRT, RM4.7bn LRT 3 (5 stations in Selangor revived), RM0.9bn PLUS highway expansion and RM15.7bn Pan-Borneo Sabah Highway will sustain investment activities in 2024. The government has also delivered on its promise to allocate more development expenditure for Sabah/Sarawak at RM12.4bn in 2024 (vs RM12.1bn in 2023).

Domestic demand to underpin economic resilience

The government has revised its 2023 GDP growth forecast to 4% (from 4.0%-5.0%) which is in line with our in-house projection of 4.1%. Meanwhile, government’s 2024 GDP growth stands at 4.0%-5.0%, compared to our in-house projection of 4.3%. Private consumption continues to be the key growth driver, underpinned by robust labour market and strong economic and social activities while private investment is expected to benefit from improved external environment and positive response to the NETR and NIMP 2030.