2025 GDP Growth Forecast Of 4.5-5.5 Pct Is Reasonable, Says Economist

KUALA LUMPUR, Oct 18 (Bernama) -- The gross domestic product (GDP) growth assumption of 4.5 to 5.5 per cent for 2025 is reasonable, said OCBC Malaysia senior ASEAN economist Lavanya Venkateswaran said.

She said the projection is similar to the bank’s forecast of 4.5 per cent for next year.

“Budget 2025 is a noble attempt at balancing economic priorities with political realities.

“The government remains committed to fiscal consolidation, targeting a narrower fiscal deficit of 3.8 per cent of GDP from 4.3 per cent of GDP in 2024, broadly in line with our expectations of 3.5-3.8 per cent of GDP,” she said in a statement today.

Lavanya believed that the decision to broaden the tax base by increasing the scope of the sales and service tax, taxing dividends by 2.0 per cent above a certain threshold, and laying the groundwork to introduce a carbon tax in specific sectors, are steps in the right direction.

“Bolder reforms such as re-introducing the goods and services tax, however, remained off the table at this juncture.

“Similarly, for RON95 rationalisation, the can has been kicked down the road to mid-2025, with the intention to introduce targeted subsidies rather than eliminate these subsidies completely,” she noted.

Malaysian Rating Corporation Bhd group chief executive officer Arshad Mohamed Ismail said Budget 2025 reinforces the MADANI government’s focus on driving economic growth while maintaining fiscal consolidation over time.

He noted that the current year has been strong in terms of economic growth, surpassing initial expectations, with the government projecting 2024 growth of between 4.8 per cent and 5.3 per cent.

“The groundwork laid out in the Budget 2024 has been instrumental in supporting this momentum, particularly through its alignment with the objectives of the 12th Malaysia Plan (12MP).

“As 2025 marks the final year of the 12MP, Budget 2025 sets a solid foundation to achieve growth at 4.5 per cent to 5.5 per cent, providing a strong foundation for the upcoming 13th Malaysia Plan,” he said.

He added that the target of a 3.8 per cent fiscal deficit in 2025, signalling a potential improvement from 4.3 per cent in 2024, paves the way for reinforcing the government’s financial strength and aligns with the goals outlined in the Medium-Term Framework.

“The introduction of revenue-enhancing measures in 2025, including the Global Minimum Tax and Dividend Tax, coupled with the rationalisation of RON95 fuel subsidies by mid-2025 are expected to sustain the ongoing reform agenda and signal a stronger commitment to fiscal consolidation moving forward,” he noted.

With Malaysia prepares to assume the ASEAN chairmanship in 2025, this budget also demonstrates the nation’s readiness to navigate future challenges.

Meanwhile, Khazanah Research Institute said the focus on both subsidy rationalisation and broadening of the tax base reflects sound fiscal prudence, bolstering the country’s resilience amid increasing global uncertainty.

Overall, the institute said Budget 2025 is a step forward for Malaysia’s development, striking a crucial balance between raising the country’s global economic standing and uplifting the wellbeing of the rakyat.

-- BERNAMA