The government’s Madani economy to ‘raise the floor’
PETALING JAYA: With nearly half-a-trillion ringgit in approved investments secured since 2023 and an economy that outperformed growth forecasts for three straight quarters this year, it is increasingly crucial for Malaysia to ensure the benefits of economic growth trickle down to the entire population.
The government’s “Raising the Floor” agenda is, therefore, timely in strengthening the vulnerable segments of the society through education, subsidies and social protection schemes.
This progressive agenda, which is one of the key thrusts of Budget 2025, is an extension of the ongoing efforts by the administration of Datuk Seri Anwar Ibrahim to improve the living standards of all Malaysians.
A key success of such efforts is the eradication of 65.6% hardcore poverty in the country, as announced in the Parliament on Oct 22.
Other efforts as mentioned in Budget 2025 include the 13% hike in minimum wage to RM1,700; measures to boost affordable home ownership such as the Residensi Rakyat Programme; improvements to healthcare; and a matching incentive to encourage informal workers and housewives to build retirement savings.
A notable budget announcement was the introduction of targeted subsidies, especially for RON95 petrol.
While this means a cut in the government subsidy bill, the targeted approach ensures that 85% of consumers in Malaysia will continue to enjoy the fuel subsidy, helping them to manage the high cost of living.
The government aims to undertake these “Raising the Floor” initiatives while slashing the annual budget deficit from RM99.48bil in 2022 to RM79.97bil in 2025.
Lee Heng Guie, executive director of the Socio-Economic Research Centre, said Budget 2025 measures will sustain the country’s economic growth and investment, further boosting the employment prospects.
Malaysia’s gross domestic product grew 4.2% in the first quarter of 2024, followed by 5.9% and 5.3% in the subsequent quarters. The strong growth is a reflection of a resilient private consumption and continued private investments.
The healthy private investments are the result of an increase in approved direct investments. About RM489.5bil in foreign and domestic funds were committed from the start of 2023 until mid-2024.
Explaining further, Lee said Budget 2025 looks to raise the overall income level of low wage earners via measures like the 7%-15% wage increment for civil servants and higher minimum wage to RM1,700 per month.
“Additionally, the expenditure allocation for Technical and Vocational Education and Training (TVET), as well as public investment in education, transport, healthcare and broadband and others will help sustain employment.”
Lee further noted that the trickle-down effects of the government’s policies must be felt by everyone, especially by the targeted groups.
“Beyond the cash handouts, the programmes and projects will have a direct impact on the economy and the rakyat through jobs creation,” he said.
Meanwhile, Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said the government has been pragmatic in their fiscal approach.
“Given time, I think the government should be able to raise the floor.”
On fuel subsidy rationalisation, he said the government has been extremely tactful in order to avoid self-inflicted shocks such as rapid rise in general prices.
“We could see the implementation of rationalisation in diesel subsidies this year and RON95 by the middle of next year.
“At the same time, we could see the allocation for cash handout Sumbangan Tunai Rahmah and Sumbangan Asas Rahmah have been raised from RM10bil in 2024 to RM13bil in 2025.
“So, it's a very delicate balancing act and the government also has indicated the impact via their inflation projection of 2%-3.5% for 2025 from 1.5%-2% in 2024,” he added.
Economists believe the impact of the government’s “Raising the Floor” initiatives will be increasingly visible in coming years as the Ekonomi Madani framework is progressively implemented.
