MALAYSIA — On Thursday (9 Mar), the Malaysia Parliament passed Budget 2023 in the policy stage via a voice vote, which Prime Minister Datuk Seri Anwar Ibrahim re-tabled on 24 February.

The budget is the largest in the country’s history, totalling RM388.1 billion (US$87.5 billion), and includes various initiatives and policies aimed at reducing the cost of living, such as allocating over RM55 billion for subsidies, aid, and incentives.

Malaysia’s Budget 2023 has been met with a mix of optimism and caution, with many stakeholders looking forward to the implementation of the proposed initiatives and policies.

The budget was also praised by financial institutions for its relevance to the current post-pandemic challenges and its sensitivity to the real hardships faced by the people.

Bursa Malaysia chief welcomes Budget 2023

Bursa Malaysia Bhd chairman Tan Sri Abdul Wahid Omar has praised Malaysia Budget 2023 as “the first in a long while” for its focus on human values and continuous development.

“Malaysia Madani is clearly committed to bettering the human condition and instilling a spirit of continuous development.”

In his speech at the Invest Malaysia 2023 event on Wednesday, Abdul Wahid welcomed the measures in the budget that encourage initial public offerings (IPOs) and the absence of the prosperity tax, The Star reported.

He highlighted specific measures, such as the tax exemption extension for listing expenses and plans for dual-class shares, that will help attract high-growth technology companies and encourage listing activity.

Abdul Wahid believes that these measures will help achieve the target of 39 new listings for 2023 compared to the 35 listings in 2022.

EY: Implementation of capital gains tax should be studied in detail to avoid unintended adverse implications

Ernst & Young(EY) Malaysia highlighted that Malaysia’s Budget 2023 aims to accelerate economic recovery, spearhead sustainable growth, and foster an inclusive society.

The government spending for 2023 is expected to be 17% higher than the Budget 2022 allocation, increasing from RM332.1 billion to RM388.1 billion.

The budget also proposes measures to spur economic growth, such as reforming public sector institutions, accelerating the approvals for high-potential investment projects, improving the procedures for doing business, and adopting digital and technology services.

EY noted that the budget aims to support MSMEs(Micro, Small & Medium Enterprises) amidst financial challenges and rising costs by reducing the income tax rate and providing assistance in the form of various loan facilities and guarantees, grants, and allocations to automate and digitalise their operations.

“Overall, the measures appear to be cohesive, comprehensive and inclusive, and lay the foundation for a more sustainable future. ”

However, EY warns that certain measures, such as the potential capital gains tax on the sale of unlisted shares, should be studied in further detail to avoid unintended adverse implications.

Malaysia’s SC welcomes initiatives in Budget 2023 to boost capital market growth and support local businesses

The Securities Commission Malaysia (SC) Chairman Dato’ Seri Dr Awang Adek Hussin welcomed the measures announced in the retabled Budget 2023, which would enable the capital market and its supporting ecosystem to serve the needs of the domestic economy and businesses.

These measures include the allocation of RM40 million to the Malaysia Co-Investment Fund (MYCIF) for alternative financing, facilitating more marketplaces for secondary trading of private market instruments, and allowing the issuance of dual-class shares to encourage the listing of high-growth technology companies.

Awang Adek noted that MYCIF has been successful in securing financing needs for startups and MSMEs. The additional RM40 million to MYCIF will further enhance the liquidity of ECF and P2P markets to better serve the financing needs of this important segment of the economy.

The SC sees these initiatives as supportive of the needs of the domestic economy and businesses and will work with relevant stakeholders to operationalize them.

Fitch Solutions predicts quicker fiscal consolidation

Fitch Solutions predicts that Malaysia is likely to achieve fiscal consolidation in the post-pandemic era, with the budget shortfall in 2023 expected to decrease to 4.9% from 5.3% previously.

Fiscal consolidation is defined as concrete policies aimed at reducing government deficits and debt accumulation.

The Edge reported that Fitch Solutions revised down its forecast due to the budgeted amount of RM386.1 billion announced by PM Anwar in February 2023, which it deemed more expansionary than the previous budget proposed in October 2022.

“Overall, we expect revenue as a share of GDP (gross domestic product) to fall to 15.2% of GDP this year, from 16.5% in the previous fiscal year, and slightly below the government’s forecast of 15.4% of GDP for 2023.”

Fitch Solutions predicted that expenditure to decrease to about 20.1% of GDP in the same year. The total government debt as a share of GDP is expected to reach 60.7% in 2023, which is lower than Fitch’s previous estimate of 63.4%.

KPMG gratified Anwar’s budget in touch with hardship faced by the people

Soh Lian Seng, KPMG Malaysia’s head of tax stated in a report that Anwar’s budget reflects the Government’s drive for a reform agenda focusing on fair, equitable, sustainable and people-led economic growth and development.

“Although the global economic growth is expected to slow to 2.9%, the Government is buoyant that Malaysia will achieve a GDP of 4.5% for 2023 whilst the fiscal deficit is projected at 5% of GDP (2022: 5.8%).”

He noted that despite the expected decline in government revenue to RM291 billion in 2023 (compared to RM294 billion in 2022) due to lower crude oil prices, Malaysia is still optimistic about achieving a record tax revenue collection of RM218.3 billion (compared to RM208.8 billion in 2022).

“It is comforting to note that the Government is in touch with the current and real hardship faced by the Rakyat and has no plans to reintroduce a consumption tax.”

Echoing EY Malaysia’s opinion, Mr Soh proposed that a luxury goods tax and capital gains tax would be introduced upon further studies and deliberation.

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