Maybank Investment expects less expansionary fiscal policy in Budget 2023

Maybank Investment Banking Group expects a less expansionary fiscal policy in the upcoming Budget 2023 with a lower budget deficit to gross domestic product (GDP) ratio of 5% amid a fairly limited fiscal space.

Chief economist Suhaimi Ilias said the government is expected to kick-start medium-term fiscal consolidation in line with the aim to bring down the budget deficit from between 6% and 6.5% of GDP from 2020 to between 3% and 3.5% by 2025 as per the 12th Malaysia Plan (12MP).

“I think the process must begin in 2023, the midpoint of the 12MP, and this is also reasonable from the perspective that narrative by the government on fiscal reform and shifting subsidies from current blanket subsidies to targeted subsidies,” Bernama reported him saying at the Bursa Malaysia-Maybank Sectorial Series “Why Malaysia” webinar on Monday (Aug 15).

He said the need to engage in medium-term fiscal consolidation is also important, such as having more sustainable sources of revenue rather than relying on volatile commodity-related revenue as well as one-off tax revenue such as the Cukai Makmur.

Meanwhile, head of equity research Anand Pathmakanthan said he estimated that Malaysia would see growth in rebounding post-Cukai Makmur and sustained economic recovery with 12.4% earnings expansion for the FTSE Bursa Malaysia KLCI in 2023.

He said commodity sectors such as oil and gas as well as palm oil would have sustained growth and become winners in an inflationary environment although rising cost pressures result in margin pressures across multiple sectors.

“Therefore we see ‘overweight’ stance for automotive, aviation, gaming, healthcare (hospitals), petrochemicals, renewables, and technology sectors; ‘neutral’ for construction, consumer, large-cap banks, media, plantations, and property sectors; and ‘underweight’ call for healthcare (gloves),” he added.

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