Budget 2024: Economy reformation, empowering rakyat


UNLIKE the previous budget announcement, Budget 2024 does have some ‘trailer’ way before the announcementnamely Ekonomi Madani and 12th Malaysia Plan Mid-Term Review.

Overall, we suppose the local bourse FBM KLCI to treat the budget mildly ahead. Moving onwards, we continue to hold a long-term constructive view of Malaysia supported by the subsided political instability and clearer policy framework for economic growth.

The 2024 Budget allocates a total of RM393.8 billion, comprising RM303.8 billion as operating expenditure and RM90 billion as development expenditure, including RM2 billion in contingency savings.

Government revenues for 2024 are expected to increase from RM303.2 billion this year to RM307.6 billion. The fiscal deficit will also be reduced to 4.3 per cent next year.

The government has cited they are trying to practice an ‘expansionary fiscal stance’ while controlling the fiscal deficit at a manageable level of 4.3 per cent in 2024.

We see a minimal burden of the higher service tax (from six to eight per cent) to households as it excluded the most vulnerable foods, beverages, and telecommunications segments. At the same time, generous assistance such as rebates on electric bills up to RM40 per month and additional cash handouts (Rahmah Cash Aid) will somehow support household spending.

Logistics companies and specific groups will continue to enjoy subsidised diesel, while other users will face higher prices as part of the government’s plan to restructure fuel subsidies.



At this point, it’s challenging to comment on how the diesel subsidy reform will translate into increased living costs for end-consumers given the government hasn’t provided more details about the ‘other users’.

However, we believe this marks the government’s initial step toward reducing the initial blanket subsidies to a more targeted version, and this restructuring will unfold gradually, in line with our previous view.

Additionally, we are eagerly awaiting further details on temporary price controls for poultry products, expected to be announced in the next two weeks.

As part of the ongoing efforts outlined in NIMP 2030, the government’s commitment to increase the reinvestment tax allowance from 70 to 100 per cent in high growth high value (HGHV) sectors is poised to serve as a significant tailwind for our economic growth.

Notably, the E&E and petrochemical sectors were specifically mentioned in the speech. Furthermore, the government demonstrates a strong commitment to fostering progress in automation and across small and medium enterprises, offering multiple incentives in the Budget 2024.

We anticipate that players in the automation/industrial-related chips sector and software developers could greatly benefit from these initiatives.

In accordance with the NETR initiatives, the renewable energy sector, including electric vehicles (EVs), emerges as a key beneficiary in Budget 2024. Our perspective is that companies concentrating on EV-charging infrastructure are poised to be the early beneficiaries of these incentives, outpacing EV automakers.

We posit that the incentives may not be enticing enough for the public to make widespread purchases of durable items like EVs, given the prevailing global recessionary concerns.

Besides, with the anticipated revival of mega infrastructure projects, the ease of current conditions for MM2H (Malaysia My Second Home) and new initiatives under ‘Visa Liberalisation Plan’ should positively contribute to our tourism activities, subsequently upholding the domestic spending activities.

In the construction sector, the government has earmarked RM4.7 billion for the construction of 5 LRT stations in the Klang Valley region, which were previously shelved. Additionally, the Penang LRT will be developed under a private-public partnership model, with a total investment of RM10 billion.

While this news is encouraging, it indicates that the government remained committed to ongoing infrastructure projects while the absence of new mega projects may constrain the upside potential for the construction sector in the short term.


Total Expenditure (RM billion).


Operating Expenditure vs Development Expenditure.


Key Takeaway

Unlike the previous budget announcement, Budget 2024 does have some ‘trailer’ way before the announcement, namely Ekonomi Madani and 12th Malaysia Plan Mid-Term Review.

Thus, most of the ‘surprises’ including the continuation of infrastructure projects, cash handouts to assist consumers particularly low-to-middle income group’s burden amidst the rising living cost environment, HGHV industrial transformation, and subsidies reformation to reduce the fiscal deficit have not been a piece of astonishing news for us.

Fortunately, the government does not impose over-burdening taxes to higher income groups or taxes that could severely negatively impact listed companies’ profitability like what we have experienced during the Cukai Makmur era.

Additionally, we are of the view that the supportive measures to consumers could partially offset the macro headwinds and maintain the domestic economic growth momentum to sustain at the current positive level, mainly driven by consumption at this phase.

Overall, we suppose the local bourse FBMKLCI to treat the budget mildly next week. Moving onwards, we continue to hold a long-term constructive view of Malaysia supported by the subsided political instability and clearer policy framework for economic growth.


Fiscal Deficit to GDP ratio.