PM Anwar Tables Revised Budget 2023, Announces Imminent Tax Changes

Malaysia's Prime Minister Anwar Ibrahim, who doubles as the country's Finance Minister, has tabled the revised Budget 2023 to parliament. The spending plan totals MYR386.1bn and is the largest in Malaysia's history.

• The initial version of the budget was not passed by lawmakers as then-Prime Minister Ismail Sabri dissolved parliament and called a general election. Upon taking office, his successor announced that he would revise Ismail Sabri's spending plan.
• The new Budget 2023 assumes GDP growth at +4.5% Y/Y versus the prior estimate of +4%-5% Y/Y, while the fiscal deficit is expected to narrow to 5% of GDP (versus prior estimate of 5.5%) as the government forecasts higher tax collection.
• In his budget speech, Anwar pledged fiscal prudence and outlined new tax measures. His administration will introduce a luxury goods tax and an excise duty on certain nicotine products. It will also study imposing a capital gains tax.
• Meanwhile, the government will cut the base tax rate for MSMEs to 15% from 17% and extend tax incentives for electronics and aerospace manufacturing companies to relocate to Malaysia in a bid to stimulate the economy.
• The ringgit has shown a limited reaction to the budget announcement, with spot USD/MYR last seen +20 pips at MYR4.4360 after holding a tight range through the day.