Budgeting, like dieting, is hard. And it is especially difficult ahead of an imminent dissolution of Parliament (which was announced by the PM yesterday, with general elections to be held within 60 days).
"Hence, the record MYR372b planned expenditure announced in Budget 2023 last Friday was not unexpected, and neither was the associated largesse for key voter blocs i.e. cash transfers to low income, salary adjustments/payouts for civil servants and a tax cut for middle-income taxpayers," says Maybank.
Thornier issues such as targeted fuel subsidies and carbon tax got brief mentions and no specific timelines, while potential return of GST was not mentioned at all. Still, the equity market will breathe a sigh of relief.
There were no earnings-sapping corporate charges akin to “Cukai Makmur” per Budget 2022.
"Further, while 2023’s targeted budget deficit of 5.5% (2022E: 5.8%) is high, medium-term fiscal consolidation is signaled by an unchanged 12th Malaysia Plan 2025 deficit target of 3.5%, and pending Fiscal Responsibility Bill and Medium-Term Revenue Strategy, the latter likely to (re)introduce sustainable tax/revenue enhancing measures such as GST," the analysts say.
Getting the fiscal house in order, albeit delayed, reduces risks of further ad-hoc corporate levies and interest rate/currency vulnerabilities.