THE clarity of economic policies and early reforms put in place through the Ekonomi Madani framework have contributed to Malaysia's current momentum of economic growth, with an encouraging economic growth of 4.2 per cent in the first quarter of 2024.
This surpassed that of regional countries like Korea, Singapore and Thailand.
The robust growth was driven by the recovery in exports performance, robust tourism activities and sustained domestic demand despite challenging external conditions.
The 2025 Budget aims to build on these positive developments and drive the implementation of reforms towards realising the goals of Ekonomi Madani.
In the first quarter of 2024, total trade grew 6.8 per cent to RM690.5 billion compared to RM646.8 billion in the first quarter of 2023. Exports of goods and services in the first quarter of 2024 grew 5.2 per cent compared to a contraction of 8.1 per cent in 2023.
Private investments recorded a buoyant growth of 9.2 per cent in the first quarter of 2024, compared to the 4.6 per cent rise in 2023. This robust growth was underpinned by capital spending related to infrastructure, machinery and equipment, and other assets.
Meanwhile, the total approved investments came to RM83.7 billion, with foreign investments contributing RM47 billion or 56 per cent, while domestic investments made up the remaining balance of RM36.7 billion or 44 per cent.
For the labour market, the number of employed persons increased 2.1 per cent to 16.4 million, contributing to a low unemployment rate of 3.3 per cent.
The government is confident that Malaysia will achieve the targeted annual growth rate of between 4.0 per cent and 5.0 per cent in 2024.
During 2024 Budget, the government announced several revenue measures and expenditure optimisation efforts, including key reforms to transition from blanket to targeted subsidies.
Accordingly, the government aims to further taper its fiscal deficit to 4.3 per cent of GDP in 2024, from 5.0 per cent in 2023.
The government remains committed towards fiscal consolidation to achieve at least a 3.0 per cent deficit in the medium term, while ensuring fiscal policy remains supportive of economic growth.
The 2025 Budget aims to focus on three important thrusts of the Ekonomi Madani framework:
A. Raise the ceiling: This thrust aims to restructure the economy and boost national competitiveness, catapulting Malaysia into an economic leader in the Asian region.
b. Raise the floor: This thrust aims to improve the quality of life for all Malaysians to ensure equality of opportunities, a decent standard of living and social protection for all.
c. Good governance and public sector reform: This thrust aims to enhance transparency, efficiency and accountability in the government.
Through 2025 Budget, the government will prioritise measures that will contribute towards enhancing Malaysia's global competitiveness, particularly improvements in ensuring "Ease of Doing Business" to encourage set-up of new businesses and expansion of existing investments.
It is imperative that in order to place Malaysia as a leading investment destination in the region, issues related to bureaucratic red tape and inefficienciesneed to be addressed.
The 2025 Budget will catalyse the areas of emphasis for the New Industrial Master Plan 2030 especially on industrial investment, skilled labour and technology adoption related to high-growth high-value investments.
Catalysing such investments will involve formulating incentives and financing that will support industrial development, enhance domestic linkages to generate wealth through manufacturing activities, create high-value jobs and strengthen Malaysia's position in the global value chain.
The 2025 Budget also plans to build on early efforts to develop the economy's next growth engines, for instance, in the areas of carbon capture, utilisation, and storage (CCUS), green industrial parks and higher-value semiconductor manufacturing.
To accelerate Malaysia's transition towards a greener economy, the National Energy Transition Roadmap has outlined several key priorities. The Government acknowledges the importance of CCUS as a new source for economic growth and in achieving the goal of net-zero greenhouse gas emissions by 2050.
Its diverse tapestry of cultures and unique natural endowments have made Malaysia a desirable tourist destination.
Therefore, 2025 Budget will outline measures to elevate our unique offering, coupled with better connectivity, to increase the spillover effect from tourism activities that will benefit local communities. In preparation for Visit Malaysia 2026.
The 2025 Budget will support greater facilitation of tourist arrivals, increased flight connectivity and improvements in tourism products and offerings.
Malaysia's tax revenue, at 12.6 per cent of GDP in 2023, ranks among the lowest in Asean. In view of this, 2025 Budget will require measures to broaden the tax base, continuously ensure a progressive tax system, reduce tax leakages and enhance tax compliance.
The budget will also initiate measures to better manage public expenditure in order to effectively and efficiently support Ekonomi Madani aspirations.
Notwithstanding the various prevailing challenges on the internal and external fronts, the government is optimistic that the budget will take Malaysia one step closer to realising Ekonomi Madani's vision.
*The writer is a tax partner for SCS Global Consulting (M) Sdn Bhd.