Budget 2024: Economic Growth, Fiscal Discipline, and Market Catalysts

Photo of Anwar delivering the speech on Budget 2024 - Facebook

The Malaysian government is optimistic about the country’s economic growth, with expectations that the GDP will increase by 4.05% in 2024. This growth is attributed to the steady expansion of domestic demand and a recovery in external trade.

While the inflation forecast is expected to hover between 2.13.6% for 2024, the government is considering a managed-float retail fuel price mechanism to stabilize fuel prices.

In terms of public sector finance, the fiscal deficit is projected to fall to -4.3% of GDP in 2024, showcasing the government’s commitment to fiscal consolidation. The federal government debt is expected to remain below 65% of GDP. These efforts align with the goals of the 12th Malaysia Plan.

Economic Growth in Prospect

Anwar with the original copy of the Budget – Photo: Facebook

While Budget 2024 doesn’t bring significant surprises to the equity market, some potential catalysts are on the horizon. The proposed capital gains tax (CGT) at 10%, set to be implemented from March 1, 2024, could encourage more listings on the equity market.

Additionally, tax exemptions for income from Islamic Securities Selling and Buying (ISBB) are expected to boost market volume and liquidity. These measures may reinvigorate the local Bursa Malaysia equity market.

Despite domestic developments, external factors like US economic data and interest rate outlook will continue to influence equity market sentiment. Investors are increasingly focused on the favorable growth and inflation outlook for the next year.

As a result, analysts maintain a year-end FBM KLCI target of 1,540 points and an FBM70 end-2023 target of 14,500 points, both reflecting the positive economic outlook and government’s commitment to fiscal discipline.