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Goldman Sachs Sees BNM On Hold Through 2024, Post Friday's Government Budget


The US Bank weighs in on the Malaysia budget (from last Friday), stating it was broadly in line with its expectations (fiscal deficit of 4.3% projected for 2024). It expects BNM to remain on hold until the end of next year. The government's subsidy rationalization scheme is important for the inflation outlook (although key details on this are yet to emerge), see below.

  • "Malaysia's Ministry of Finance tabled the FY24 budget in parliament on October 13, proposing a fiscal deficit of 4.3% of GDP for 2024, lower than the 5.0% of GDP budget deficit target for 2023. The government introduced new revenue enhancing measures including a capital gains tax, high-value goods tax, and a 2pp increase in the services tax. The government will also reduce electricity subsidies, remove some price controls and phase out the diesel subsidy in stages -- although timelines around the subsidy phase out are still unclear. The budget was broadly in line with our expectations -- we continue to expect BNM to keep its policy rate unchanged until end-2024."
  • "Similar to the previous announcements, details on the timelines and implementation of subsidy rationalization schemes remain unclear. At this juncture, we keep our headline inflation forecast unchanged at 2.5% as we had already budgeted for some subsidy rationalization next year in our forecasts. We see upside risks to our inflation forecasts should the timeline/magnitude of the diesel and electricity subsidy cuts be faster/larger than in our baseline projections. We also highlight the risk of higher subsidy spending should Brent crude oil prices in 2024 be higher than the government's projection of USD 85/bbl average (GSe 2024: USD 98/bbl average). Given the absence of more details, for now we continue to expect no further monetary policy change from the BNM until the end of 2024."

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