Cut in petrol subsidies and wage growth to be addressed in Budget 2025

In Malaysia’s upcoming Budget 2025, set to be unveiled on October 18, key issues are expected to dominate the conversation, particularly the possibility of cutting petrol subsidies. Prime Minister Anwar Ibrahim, who is also the Finance Minister, faces a delicate balancing act—trimming Malaysia’s hefty RM81 billion subsidy bill while avoiding a public backlash. Diesel subsidies were already reduced in June, and now the government may target blanket RON95 petrol subsidies, which disproportionately benefit higher-income groups.

Wage growth above GST

However, analysts predict that immediate cuts or the reintroduction of the Goods and Services Tax (GST) are unlikely. Instead, Anwar is expected to focus on gradual fiscal changes, prioritizing income growth and addressing inflation concerns. This could mean a push for higher wages, especially in the private sector, alongside potential tweaks to tax relief policies and a review of Malaysia’s progressive wage system.

Amidst these potential changes, Malaysia’s economy is showing signs of strength, with the World Bank recently upgrading its growth forecast to 4.9 percent for 2024. This improving economic outlook, alongside rising investor confidence, will likely shape a budget focused on balancing fiscal consolidation with public needs.