According to Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid, Budget 2024 has provided the right platform for the economy to record respectable growth, as more adults are joining the workforce, thus bringing the unemployment rate down. - FILEPIC
WHILE all eyes are on the upcoming Budget 2025 announcement this Friday, economists believe Budget 2024 has set off a ripple effect, impacting both society and the economy.
By laying a strong foundation through fiscal responsibility, subsidy reforms, and targeted spending, they say Budget 2024 has stabilised the economic landscape, boosted employment, and increased household incomes.
As businesses grow more confident and investments rise, these strategic policies are driving broader progress, positioning Malaysia for long-term prosperity and greater economic resilience.
Economist Geoffrey Williams said Budget 2024 “was one of the best budgets in decades not because of a list of programmes but because of a change in approach.”
He commended the government's modest spending increases, minor tax changes that raised revenue, and efforts to reduce debt and the deficit.
“There was a strong emphasis on cutting wastage, leakages and corruption,” he said.
Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said that Budget 2024 "has provided the right platform for the economy to record respectable growth."
He highlighted Malaysia's current full employment status, with more adults joining the workforce.
“Full employment translates into a steady income stream, allowing the households to spend,” he explained.
Last week, Maybank Investment Bank Research noted that Malaysia's job market has reached full employment, as indicated by the country's low unemployment rate.
The Statistics Department (DOSM) said, in August 2024, the local labour force grew by 0.1% reaching 17.22 million people compared to 17.2 million in July.
While the number of employed persons increased by 0.2% to 16.66 million from 16.63 million in the previous month, the number of unemployed persons dropped by 0.9% to 558,500 from 563,700 in July, DOSM added.
This brought the unemployment rate down to 3.2% in August, after remaining steady at 3.3% for nine months.
Additionally, Afzanizam said the appreciation of the ringgit appears to have boosted confidence that the economy is on the right track toward becoming a high-income nation in the near future.
“We have the right combo for the economy to prosper,” he noted.
The ringgit strengthened to RM4.12 against the US dollar as of Sept 30, a level it has not seen for over three years after being close to RM4.80 in April.
However, the local currency has now eased back close to RM4.30 levels against the greenback.
Williams further pointed out that the subsidy rationalisation process, beginning with utilities and later diesel reforms, alongside the focus on raising incomes through civil service pensions and targeted financial aid, were pivotal.
"The biggest impact was the emphasis on fiscal responsibility and laying the groundwork for reforms following unstable fiscal policy under the previous administrations. This helps build credibility and confidence in international markets and has encouraged new foreign direct investment (FDI), for example, which will be beneficial in the long-term," he added.
Williams said Budget 2025 should build upon these initiatives, laying the groundwork for structural reforms aimed at increasing incomes and addressing the rising cost of living.
Budget 2024 laid the groundwork for structural reforms; Budget 2025 should build upon these initiatives for continued stability in the country’s economic landscape, said economist Geoffrey Williams.
Similarly, Afzanizam pointed out that private investments are accelerating at double digits, reflecting rising confidence in the economy, which facilitates businesses' decision to incur capital expenditure.
He also noted that foreign investments, be it FDI or portfolio investments, continue to record positive inflows.
Afzanizam said fiscal consolidation is critical for rearranging and reprioritising spending, enabling the government to have more flexibility to provide targeted financial aid and invest in areas that will enhance productivity in the mid to long term.
“It’s a bold move indeed, and yet the country continues to maintain positive growth momentum,” he said.
He highlighted several measures introduced by the government, including:
- Low-value goods tax of 10% for imported goods tagged below RM500 sold online
- Higher services tax rate of 8% from 6%
- Higher excise duty for sugared beverages from 40 sen per litre to 50 sen
- Raising the water and electricity tariffs
- Diesel subsidy rationalisation
- Electronic invoicing (e-invoicing) system
Afzanizam said the implementation of fiscal consolidation measures is instrumental in driving the economy towards more sustainable and inclusive growth.
“All in all, Malaysia is in the sweet spot now,” he said, urging the government to maintain their reformist agenda in the upcoming budget announcement.
