Malaysia’s Budget 2024 has drawn significant attention for its bold approach to fostering economic resilience, supporting industry growth, and driving long-term sustainability.
One of the central themes of Budget 2024 was the balancing act between supporting lower-income groups and addressing the country's fiscal deficit.
The Public Finance and Fiscal Responsibility Act 2023, which was introduced on Jan 1, 2024, created a significant milestone as Malaysia for the first time in history had an Act related to fiscal policy management.
The Act was to ensure the sustainability of public finances, preserve macroeconomic stability and protect the well-being of the people.
The Act will also ensure that the Finance ministry formulates a Medium Term Fiscal Framework to guide fiscal planning, strategies and priorities over a three to five year period.
MARC Ratings Bhd chief economist Dr Ray Choy said Budget 2024 laid the groundwork for Malaysia’s long-term economic development.
Dr Ray Choy, chief economist, MARC Ratings Bhd highlighted that the review of subsidies and taxes played a key role in achieving this balance.
For instance, targeted reforms on diesel subsidies and excise duty increases on items causing negative externalities, like sugar and tobacco, were significant changes.
He believed these measures, alongside the removal of subsidies on chicken and the continuation of cash handouts like Sumbangan Tunai Rahmah and Budi Madani, have helped contain inflation effectively.
“Although these measures could be seen as inflationary, inflation has remained muted, with a year-to-date rate of 1.9%, below the official 2.1% to 3.6% target. This has supported private consumption, which grew by 6% in 2Q2024, which is expected to be sustained for the remainder of the year,” he said.
Essentially, fiscal policies were a cornerstone of Budget 2024.
Dr Liew Chee Yoong, associate professor of finance at UCSI University Malaysia said the government’s aim to reduce the fiscal deficit to 4.3% of gross domestic product in 2024 from 5% in 2023 was via the implementation of a targeted subsidy rationalisation scheme, which was key to reducing public expenditure.
This, combined with measures like e-invoicing to reduce tax leakages, reflected a focus on strengthening fiscal responsibility.
In terms of industry growth, Choy pointed out that the continuation of the New Industrial Master Plan 2030 has facilitated a favourable environment for expansion.
Private investments surged by 12% in Q2 2024, and the government's focus on domestic direct investment, with specific strategies for government-linked investment companies, boosted key sectors like construction, manufacturing, and agriculture.
According to Liew, Budget 2024 focused on strengthening domestic industries and encouraging small and medium enterprises (SME) internationalisation.
He added that key sectors like the digital economy, aerospace, and electronics were prioritised with RM1.5bil in funding.
In addition, RM44bil had been directed towards micro SMEs to support loans, credit, and financial guarantees, boosting industries reliant on innovation and digital transformation.
For UCSI University Malaysia associate professor of finance Dr Liew Chee Yoong, Budget 2024 focused on strengthening domestic industries and encouraging small and medium enterprises (SME) internationalisation.
Sustainability is another key pillar of the budget.
Liew highlighted that the National Energy Transition Roadmap is central to this vision, with RM2bil allocated for a national energy transition facility to support Malaysia’s renewable energy ambitions.
He pointed out that with targets to increase the share of renewable energy from 4% to 17% by 2050, the budget’s incentives for green energy projects and the issuance of RM1bil biodiversity sukuk bonds are designed to stimulate private capital inflows into this space.
Overall, Choy said Budget 2024 laid the groundwork for Malaysia’s long-term economic development by fostering high-growth and high-value industries such as data centres and advanced semiconductors.
He added that the increased development funds for Sabah and Sarawak aim to reduce regional disparities by improving infrastructure and creating economic opportunities were crucial for inclusive, long-term growth.
Challenges remain, particularly in terms of inflation and subsidy rationalisation, but Malaysia’s overall strategy of fostering resilience while embracing green growth shows promise for the years to come.
