The World Bank has commended Malaysia’s economy, attributing its strong recovery to several key factors. One major driver is the stability in the government, which has been in power for 22 months and has been able to lay out policies and execute them effectively. Another significant change is the impact of geopolitics, as companies are looking to diversify their supply chains, leading to expansions by companies like Intel, Infineon, and AMD in Malaysia, boosting future growth prospects.
The upside of Malaysia’s economy is evident in the promising growth seen in the first two quarters, driven by investments and proactive measures by the government to stimulate the economy. One unique aspect of Malaysia is the role played by Government-Linked Investment Companies (GLICs) in contributing to economic growth. With assets totaling billions of ringgit, GLICs have committed to injecting significant funds into the economy over the next five years, acting as an additional engine for growth.
The rollback of the RON95 subsidy is a key area of focus for the government, with plans in place to carefully consider and implement it to avoid any negative repercussions. While the specifics are still being worked out, the government’s commitment to fiscal reform remains strong, as evidenced by previous actions taken in areas like electricity, water, diesel, and chicken subsidies. The government is expected to provide further clarity on the subsidy rollback during the budget announcement.
The market’s expectations regarding the RON95 subsidy rollback are significant, as it is seen as a key indicator of the government’s commitment to rationalization efforts. The government has a track record of tackling subsidy issues in various sectors, and it is anticipated that similar efforts will be made in relation to the RON95 subsidy. With favorable oil prices creating additional fiscal space, the government has the opportunity to refine its approach before implementing any significant changes.
The subsidy bill for the coming year is expected to be lower than previous years, as the government continues to implement reforms and rationalize subsidies. With efforts to reduce the subsidy bill and provide targeted social assistance, Malaysia is on track to achieve significant savings in the upcoming year. Additionally, the recent appreciation of the ringgit may have various impacts on businesses, with winners and losers expected across different sectors. However, Malaysia’s resilience and ability to adapt to changing conditions suggest that businesses will find ways to adjust and continue progressing forward.
