Prime Minister Datuk Seri Anwar Ibrahim tabled the mid-term review of 12th Malaysia Plan 2021-2025 (12MP) in Parliament, proposing new policies and techniques to address current challenges facing the country.
12MP initially anchored on three key themes: 1) resetting the economy, 2) strengthening security, wellbeing and inclusivity as well as 3) advancing sustainability.
However, the government is streamlining the idea of MADANI Malaysia following the MADANI Economic framework, and hence has revised the key themes to ‘sustainable, prosperous, high-income nation’ with a total of 17 major shifts and 71 major initiatives introduced.
Key Highlights
CGSCIMB’s Economics Focus today (Sept 12) cited the plausible upward revision in GDP growth targets for 2021-2025F to 5.0-6.0% from original targets of 4.5-5.5% (CGS-CIMB forecasts: 4.0% in 2023F and 4.6% in 2024F), due to higher contributions from private expenditures. By industry, the government upgraded its GDP growth forecasts for the services sectors, driven by the consumer-driven wholesale and retail trade, transport and government services.
The additional RM15bn added to the RM400bn development expenditure allocations to finance extension of existing and new developments where it plans to spend at least RM90bn p.a. over 2023-2025 to align with the vision of the MADANI Economy.
The plan will guide the development of a central reference data system (PADU) for targeted subsidies. This will be used as a reference for the restructuring of the electricity, diesel and petrol subsidies and other social assistance to ensure more prudent fiscal management.
CGSCIMB anticipates detailed measures to be introduced in the Budget 2024 tabling next month.
High value-added operations and high-quality investments will be prioritised to highlight the high-value high-growth (HGHV) industries, such as the electrical and electronics (E&E) industry, as one of the key strategies. The HGHV agriculture and agro-based industry also to be implemented with a focus on promoting low-carbon agriculture and accelerating modernisation through private investment in smart farming technology adoption.
Capital gains tax to be introduced in 2024 as hinted by PM Anwar during his parliamentary speech. While the nature of the tax is yet to be clarified, CGSCIMB thinks a capital gains tax would likely be charged on the disposal of unlisted shares.
Greater clarity on medium-term growth potential
“For us, there were no major surprises announcement-wise as the 12MP encapsulated not only the Ekonomi MADANI framework, but also the New Industrial Masterplan and the National Energy Transition Roadmap released just a few weeks ago. However, we note a wider interest in developing the sectors of halal industry, tourism, smart farming, and global services, CGSCIMB said in its note today.
On infra projects, Penang LRT, alongside nine other new transportation projects received a mention, while MRT3 was excluded. We also find a greater commitment to address issues of governance, with several legislative changes planned, such as the Political Donations Act, Government Procurement Act, and Fiscal Responsibility Act.
On the development expenditure increase of RM15bn (3.8% rise) was not a surprise to us, as this was likely to take into account the recent higher inflation rather than any material changes in spending direction.
Overall, CGSCIMB thinks the government is striking a right balance between the various priorities for growth, and provided enough clarity for investors to see Malaysia’s medium-term potential.
For now, CGSCIMB maintains their GDP growth forecasts of 4.0% for 2023F and 4.6% for 2024F.
