Goldman Sachs On Malaysian Budget

"Malaysia's Ministry of Finance tabled the FY23 budget in parliament on February 24, proposing a fiscal deficit of 5.0% of GDP for 2023, modestly lower than the 5.5% budget target announced in the pre-election budget in October. The government plans to raise spending ratios, but also set a more ambitious revenue ratio target compared to the pre-election budget.

Importantly, while the budget mentions a commitment to targeted fuel subsidies, there are no details, deadlines or roadmap to achieving this transition – the reduction in budgeted fuel subsidy spending appears to be purely on account of a lower oil price assumption. Accordingly, we are revising down our headline inflation forecast to 3.0% this year (vs. 4.1% previously). We are also revising our BNM policy rate forecasts and now expect only one more 25bp hike in May (vs. our previous expectation of another 50bp of policy rate hikes this year)."