Malaysia’s Budget May be Expansionary Ahead of Polls, World Bank Says
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(Bloomberg) -- Malaysia’s 2023 budget will likely focus on people-centric spending ahead of a general election, according to the World Bank.
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The budget will boost allocation to education and health sectors as part of the five-year (2021-2025) road map known as the 12th Malaysia Plan, said Apurva Sanghi, the bank’s lead economist for the Southeast Asian nation
Still, the budget won’t be overly expansive as the economy is doing well and limited fiscal space remains a challenge, he said
There’s need to mobilize government revenue through new sources such as the Goods and Services Tax (GST), though its reintroduction will depend on the inflationary pressures prevailing at the time
NOTE: Former Prime Minister Mahathir Mohamad scrapped the GST soon after coming into power in 2018, fulfilling a campaign pledge but putting state revenues under pressure
Bigger concern for foreign investors is the need for structural reforms in areas including education and labor policies, Sanghi said
The World Bank on Tuesday raised its GDP growth forecast for Malaysia to 6.4% for 2022 from 5.5% projected earlier due to stronger-than-expected activity in the first half of the year
1H growth was fueled by robust local consumption and export growth from the electrical/electronics and commodity sectors; improvement in performance in the services, tourism, and manufacturing sectors as well as a rebound in construction contributed to the revised forecast: Sanghi
The bank cut its 2023 growth estimate for Malaysia to 4.2% from 4.5% amid headwinds from slowing global demand
READ: World Bank Lowers Growth Forecasts for East Asia and Pacific (1)
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