Economic Update
Local
Market Outlook: Budget 2025 - Fostering Growth and Promoting Equality
Mon, 21-Oct-2024 09:32 am
by Research Team • Apex Research

Summary

  • With expected total revenue next year at RM340.0bn, Budget 2025 aims to narrow the country’s fiscal deficit from estimated 4.3% in 2024 to 3.8% of gross domestic product (GDP) in 2025 in bid to achieve the government’s long term fiscal consolidation target.

  • Given that the re-introduction of GST was put off the table, the (i) broadening of tax base under SST regime to include non-essential goods, (ii) proposed 2% dividend tax on dividend income of RM100,000 and above, (iii) implementation of GMT in 2025, (iv) carbon tax on iron, steel and energy industries by 2026, (v) hike in sugar-sweetened beverages tax by 40 sen/litre, (iv) full implementation of e-invoicing by 1 Jul 2025 along with the removal of blanket subsidies for RON95 in mid-2025 will be supportive towards fiscal consolidation target.

  • Once again, the education sector occupies a lion share at RM82.1bn, representing 19.5% of the total Budget allocation highlights the Government commitment towards improving education access and quality, particularly for disadvantaged communities, while the healthcare sector was allocated RM45.3bn, representing 10.8% over the total budget allocation underscores the government focus towards delivery of greater healthcare services.

  • Despite allocation towards development expenditure allocation remain unchanged at RM86.0bn vis-à-vis revised Budget 2024, the construction sector will be kept busy by several on-going key mega infrastructure projects alongside with the influx of DC-related projects in recent times. 

  • Overall, we opine that Budget 2025 as largely Neutral as it moves to mitigate some of the high cost of living through greater cash aids and broadening individual tax reliefs that will invariably translate to stronger domestic spending, going forward. 

  • We are in view that Budget 2025 beneficiaries include consumer, tourism-related, healthcare, gloves, property and technology sectors (see more below).

  • We maintain our 2024F and 2025F year-end target for FBM KLCI at 1,680 and 1,750 respectively, based on assigned 15.5x PERs.

Sentiment: Neutral
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Market Mover
Settlement Rates
Currency Buy Rates (RM) Sell Rates (RM)
USD 4.455268 4.488135
EUR 4.716585 4.723137
CNY 0.616518 0.616862
HKD 0.572409 0.576643
SGD 3.318330 3.343262