KUALA LUMPUR: Budget 2024 is likely to feature a delicate balancing act by the government between continued economic support and ensuring debt sustainability, said RHB Research.

In a research note today, it said the budget is likely to remain mildly expansionary in nature, with substantial support towards selected priority sectors and continued assistance to ease the financial burdens of the targeted groups.

“We expect some form of fiscal consolidation measures to be announced, which include the enhancement of revenue as well as the rationalisation of expenditure allocation.

“The fiscal resources would be channelled in a more targeted approach and allocated in priority areas,” it said.

Hence, RHB Research said it has revised its 2024 fiscal deficit projection to 4.5% of gross domestic product (GDP) versus its previous estimate of 4.8% of GDP.

On revenue enhancement, it said no major change in consumer tax is expected.

“The Goods and Services Tax (GST) is unlikely to be reintroduced in Budget 2024 as containing the issues of rising costs of living remains one of the priorities for the current administration.

“Among the new types of taxes that are scheduled to be implemented by 2024 is the Capital Gains Tax,” it said.

RHB Research said that on the expenditure side, it expects the development expenditure allocation to trend around RM95-100 billion, in line with the revised spending ceiling for the 12th Malaysia Plan programmes’ projects.

It said the targeted subsidy programme might be implemented by the beginning of next year.

“One of the key focuses would be the certainty and timing of fuel subsidies rationalisation. Based on the current development, some adjustments in diesel subsidies could be possible, while the petrol subsidies adjustments could take a longer time as it involves a larger user base (including households).”

RHB Research said a marginal increment for federal civil servants might be tabled in the upcoming budget announcement, where a more comprehensive review of the civil servants’ salary scheme is expected to be completed in the next six months.

“The details on the progressive wage system might be announced as well,” it said.

Meanwhile, RHB Research expects continued support for small and medium enterprises as well as priority sectors such as renewable energy, technology and digital, electrical and electronics, agriculture and rare earth industries.

“There might be a continuation of the preferential tax rate for micro, small, and medium enterprises, micro-loan facilities and more support for the startups and young entrepreneurs,” it said.

RHB Research added that Budget 2024 might include some short-term initiatives and plans in line with the targets and goals set out under the 12th Malaysia Plan’s Mid-Term Review. – Bernama