BMI: Budget A Positive Step Towards Malaysia's Goal Of Narrowing Budget Deficit To 3.5 Pct By 2027

KUALA LUMPUR, Oct 21 (Bernama) -- The 2025 Budget, tabled by Prime Minister Datuk Seri Anwar Ibrahim on Oct 18, marked a positive step towards Malaysia’s medium-term goal of narrowing its budget deficit to 3.5 per cent by 2027.

In its Quick View of Malaysia’s Budget report released today, BMI, a Fitch Solutions company, said that the government expected the fiscal deficit to narrow to 3.8 per cent of gross domestic product (GDP) in 2025, from an estimated 4.3 per cent in 2024, driven by a 5.5 per cent year-on-year (y-o-y) increase in revenue despite a 3.3 per cent increase in overall expenditure.

“Policymakers also expect real GDP growth of 4.5-5.5 per cent in 2025, as opposed to an upwardly revised of 4.8-5.3 per cent in 2024 (from 4.0-5.0 per cent previously).

“Given the current administration’s track record of sticking closely to its projections, we remain comfortable with our prevailing forecast for Malaysia’s budget deficit as a share of GDP to fall from an estimated 4.3 per cent of GDP in 2024 to 3.9 per cent in 2025 – largely in line with the government’s fiscal projections,” it said.

According to BMI, the most significant announcements in the budget were the expansion of sales and services tax (SST) to include business-to-business (B2B) commercial service transactions, non-essential food items and imported premium products like salmon and avocado.

“The government intends to channel the additional income generated to make up for the shortfall in petroleum-related revenue.

“Indeed, while petroleum-related revenue will probably ease from 3.2 per cent of GDP in 2024 to 3.0 per cent in 2025 on the government’s revised projections for oil prices to trade at US$75-80 per barrel in 2025 (BMI forecast: US$78 per barrel), it fits into policymakers’ broader goal of reducing its reliance on petroleum-related income,” it said.

Meanwhile, policymakers will impose a 2.0 per cent tax on individual dividend incomes that exceed RM100,000 from the year of assessment 2025.

-- BERNAMA