1
00:00:00,500 --> 00:00:04,679
Speaker 1: This is a podcast from BFM 89.9. The business station,

2
00:00:05,380 --> 00:00:10,010
Speaker 1: this BFM budget 2024 special is brought to you by massing.

3
00:00:11,090 --> 00:00:13,859
Speaker 1: Welcome back. You're listening to the morning run. It is

4
00:00:13,869 --> 00:00:16,920
Speaker 1: 7 37 on a lovely Monday morning and you can

5
00:00:16,930 --> 00:00:19,850
Speaker 1: see clear skies for a change. It is the 16th

6
00:00:19,860 --> 00:00:23,889
Speaker 1: of October. We are keeping to our budget 2024 theme

7
00:00:23,989 --> 00:00:28,680
Speaker 1: and the government is proposing a spending plan of 393.8

8
00:00:28,690 --> 00:00:32,879
Speaker 1: billion ring. It of this amount 77% has been designated

9
00:00:32,889 --> 00:00:34,560
Speaker 1: for operating expenditure.

10
00:00:35,049 --> 00:00:37,639
Speaker 1: While the remaining 90 billion Ring, it will be channeled

11
00:00:37,650 --> 00:00:42,069
Speaker 1: towards development expenditure. Notably, the fiscal deficit that is the

12
00:00:42,080 --> 00:00:45,319
Speaker 1: gap between revenue and expenditure will be narrowed from 5%

13
00:00:45,330 --> 00:00:49,549
Speaker 1: this year to 4.3% of GDP for 2024. And it

14
00:00:49,560 --> 00:00:51,879
Speaker 1: will lead up to the budget. The government had sent

15
00:00:51,889 --> 00:00:56,069
Speaker 1: across strong signals on moving toward targeted assistance. Last Friday,

16
00:00:56,080 --> 00:00:58,610
Speaker 1: there was the phasing out of diesel subsidies,

17
00:00:59,000 --> 00:01:02,459
Speaker 1: the ends of chicken and egg price controls which came

18
00:01:02,470 --> 00:01:06,519
Speaker 1: first and the continuation of targeted electricity subsidies based on

19
00:01:06,529 --> 00:01:07,190
Speaker 1: consumption

20
00:01:07,300 --> 00:01:10,709
Speaker 2: but targeted petrol subsidies were left out. So overall did

21
00:01:10,720 --> 00:01:13,279
Speaker 2: this first full budget of the Madani government hit the

22
00:01:13,290 --> 00:01:15,839
Speaker 2: mark of its team economic reform empowering

23
00:01:15,849 --> 00:01:19,360
Speaker 1: people for insights. We speak to Julia go senior economist

24
00:01:19,370 --> 00:01:22,479
Speaker 1: at UO Malaysia. Good morning, Julia always good to speak

25
00:01:22,489 --> 00:01:22,819
Speaker 1: to you.

26
00:01:23,300 --> 00:01:25,879
Speaker 1: Like we said, the theme of the budget is economic

27
00:01:25,889 --> 00:01:31,010
Speaker 1: reform empowering people. So what were your main takeaways of

28
00:01:31,019 --> 00:01:33,099
Speaker 1: this budget? And is it really true to

29
00:01:33,110 --> 00:01:33,709
Speaker 2: label?

30
00:01:35,120 --> 00:01:38,830
Speaker 2: Good morning. Thanks for having me on the show. Ah ok.

31
00:01:38,839 --> 00:01:41,620
Speaker 2: So for us, the broad takeaways of the budget we

32
00:01:41,629 --> 00:01:45,220
Speaker 2: felt was firstly the government's commitment to further reduce the

33
00:01:45,230 --> 00:01:50,290
Speaker 2: fiscal deficit to 4.3% of GDP next year. They use

34
00:01:50,419 --> 00:01:54,580
Speaker 2: they outlined the necessary steps needed to achieve a lower

35
00:01:54,589 --> 00:01:58,260
Speaker 2: fiscal target. And that included the new tax measures and

36
00:01:58,269 --> 00:02:01,059
Speaker 2: fiscal reforms like retargeting subsidies.

37
00:02:01,589 --> 00:02:05,150
Speaker 2: Now, the theme of reforms is also certainly true as

38
00:02:05,160 --> 00:02:10,100
Speaker 2: we saw expanded measures to transform the economy. This included

39
00:02:10,110 --> 00:02:15,130
Speaker 2: like tiered reinvestment allowances, more green sustainable measures to accelerate

40
00:02:15,139 --> 00:02:18,710
Speaker 2: energy transition. And these are aimed to spur high impact

41
00:02:18,720 --> 00:02:22,710
Speaker 2: investments as the government is targeting growth of 4 to 5%

42
00:02:22,720 --> 00:02:23,448
Speaker 2: for next year.

43
00:02:24,220 --> 00:02:27,210
Speaker 2: So overall, we see the government trying to strike a

44
00:02:27,220 --> 00:02:31,559
Speaker 2: balance between fiscal reforms that are necessary to strengthen the

45
00:02:31,729 --> 00:02:36,038
Speaker 2: government's finances. But we also recognize would impose more burden

46
00:02:36,050 --> 00:02:39,350
Speaker 2: on the people. For instance, the the

47
00:02:39,639 --> 00:02:43,500
Speaker 2: expectations that near term prices of chicken and eggs would

48
00:02:43,508 --> 00:02:47,339
Speaker 2: rise due to potential supply shortages the increase in service

49
00:02:47,350 --> 00:02:51,699
Speaker 2: tax rates would also mean higher expenses for electricity bills,

50
00:02:51,710 --> 00:02:55,388
Speaker 2: like vehicle repairs and insurance coverage. Right. So, and I

51
00:02:55,399 --> 00:02:58,329
Speaker 2: think the government understands this. So they have tried to,

52
00:02:58,610 --> 00:03:02,240
Speaker 2: to cushion the impact by increasing like targeted cash assistance

53
00:03:02,389 --> 00:03:05,339
Speaker 2: and expanded some of the personal tax relief items. But

54
00:03:05,380 --> 00:03:07,500
Speaker 2: we do, we recognize that certainly

55
00:03:07,869 --> 00:03:11,600
Speaker 2: you cannot both have to be, you have to have

56
00:03:11,610 --> 00:03:14,910
Speaker 2: a balance between both fiscal reforms and also cushioning the

57
00:03:14,919 --> 00:03:16,910
Speaker 2: impact on the people.

58
00:03:17,250 --> 00:03:21,880
Speaker 1: So Julia 300 nearly 394 billion Ringgit for budget 2024

59
00:03:21,889 --> 00:03:24,339
Speaker 1: is the largest ever. The actual quantum of spending is

60
00:03:24,350 --> 00:03:30,288
Speaker 1: lower at 3 97 billion with all these subsidy retargeting

61
00:03:30,300 --> 00:03:34,070
Speaker 1: and added taxes is will that be enough to fund it?

62
00:03:35,449 --> 00:03:40,350
Speaker 2: Ah Yeah, the allocated amount is actually slightly lesser compared

63
00:03:40,360 --> 00:03:44,949
Speaker 2: to last year because they have reduced the allocations for subsidies.

64
00:03:44,960 --> 00:03:48,630
Speaker 2: And also there is no one MDB bond reduction for

65
00:03:48,639 --> 00:03:53,330
Speaker 2: next year right now, the expenditure will be funded by

66
00:03:53,339 --> 00:03:57,830
Speaker 2: higher revenue of over 307 billion. But that and that's

67
00:03:57,839 --> 00:04:01,020
Speaker 2: mainly from direct and indirect tax revenue sources.

68
00:04:01,550 --> 00:04:05,550
Speaker 2: But any short further shortfall will be financed by borrowing

69
00:04:05,559 --> 00:04:10,750
Speaker 2: but mainly local currency borrowings. So, so yes, so the shortfall,

70
00:04:10,759 --> 00:04:13,490
Speaker 2: as I said is is by borrowings and they have

71
00:04:13,500 --> 00:04:15,089
Speaker 2: tried to to

72
00:04:15,729 --> 00:04:19,649
Speaker 2: it managed by to a lower fiscal deficit target by

73
00:04:19,660 --> 00:04:23,729
Speaker 2: increasing revenue through the enhanced tax measures. But there's so

74
00:04:23,738 --> 00:04:26,089
Speaker 2: much that they can pursue right with, in terms of

75
00:04:26,100 --> 00:04:30,190
Speaker 2: borrowings if they want to adhere to the Fiscal Responsibility

76
00:04:30,200 --> 00:04:33,049
Speaker 2: Act that was passed prior to the budget because although

77
00:04:33,059 --> 00:04:36,279
Speaker 2: there was a reduction in fiscal deficit of 4.3% the

78
00:04:36,290 --> 00:04:38,160
Speaker 2: government still needs to do a lot more right to

79
00:04:38,170 --> 00:04:39,809
Speaker 2: show up its public finances.

80
00:04:41,529 --> 00:04:44,799
Speaker 2: Yes. Uh, they, they do have, it is a lot

81
00:04:44,809 --> 00:04:49,349
Speaker 2: more areas that they can, um, they can manage. Um

82
00:04:49,359 --> 00:04:51,190
Speaker 2: We already see that they are

83
00:04:51,660 --> 00:04:55,149
Speaker 2: introducing some of the new taxes to expand the revenue base.

84
00:04:55,359 --> 00:04:59,279
Speaker 2: They are introducing e invoicing in August 2024. And that's

85
00:04:59,290 --> 00:05:03,769
Speaker 2: supposed to help broaden the the, the, the tax base

86
00:05:03,779 --> 00:05:07,428
Speaker 2: and also reduce tax leakages and the proposal to raise

87
00:05:07,440 --> 00:05:10,200
Speaker 2: the services tax rate. So although there was no new

88
00:05:10,209 --> 00:05:14,399
Speaker 2: consumption tax or GST, but they, they actually tried to,

89
00:05:14,410 --> 00:05:19,529
Speaker 2: to increase the tax revenues by, by raising the services

90
00:05:19,540 --> 00:05:20,140
Speaker 2: tax rate.

91
00:05:20,779 --> 00:05:24,029
Speaker 2: Um And I think another, another thing is that they

92
00:05:24,040 --> 00:05:26,970
Speaker 2: are trying to optimize spending and hence that's why the

93
00:05:26,980 --> 00:05:31,339
Speaker 2: reforms to retarget subsidies, which they already started with electricity

94
00:05:31,350 --> 00:05:34,269
Speaker 2: and they are moving now to, to chicken eggs and

95
00:05:34,279 --> 00:05:39,109
Speaker 2: diesel subsidies. Now, the fiscal responsibility bill is, is quite interesting.

96
00:05:39,119 --> 00:05:41,709
Speaker 2: It was passed in parliament earlier last week and it

97
00:05:41,720 --> 00:05:45,269
Speaker 2: has been talked about for years before finally coming to light.

98
00:05:45,850 --> 00:05:48,429
Speaker 2: And what the act does is really that it sets

99
00:05:48,440 --> 00:05:51,909
Speaker 2: transparent fiscal targets over the next 3 to 5 years.

100
00:05:52,109 --> 00:05:55,260
Speaker 2: And if the government fails to meet these targets, they

101
00:05:55,269 --> 00:05:57,540
Speaker 2: have to explain why in parliament and they have to

102
00:05:57,549 --> 00:06:01,209
Speaker 2: seek approval for any fiscal adjustments, right? And it also

103
00:06:01,220 --> 00:06:05,269
Speaker 2: sets clearer guidelines for government guarantees and every half year

104
00:06:05,600 --> 00:06:06,790
Speaker 2: they have

105
00:06:06,885 --> 00:06:10,214
Speaker 2: to do, they have to present what's what's, what's achieved,

106
00:06:10,225 --> 00:06:13,565
Speaker 2: what's not achieved. So I think overall, together with the

107
00:06:13,575 --> 00:06:17,135
Speaker 2: tax enhancements, optimizing of spending and with this bill, I

108
00:06:17,144 --> 00:06:19,614
Speaker 2: think will help to achieve their fiscal goals over the

109
00:06:19,625 --> 00:06:19,954
Speaker 2: medium

110
00:06:19,964 --> 00:06:23,664
Speaker 1: term. But Julia the elephant in the room subsidies of

111
00:06:23,674 --> 00:06:26,553
Speaker 1: 1 95 there was no mention of that or at

112
00:06:26,565 --> 00:06:29,464
Speaker 1: least the removal of that. Was that a missed chance?

113
00:06:30,779 --> 00:06:34,790
Speaker 2: Yes, we were anticipating I mentioned but I think it's

114
00:06:34,799 --> 00:06:38,428
Speaker 2: possible that well, they say that the rationalization of subsidies

115
00:06:38,440 --> 00:06:41,209
Speaker 2: will be done in phases and it does signal that

116
00:06:41,220 --> 00:06:44,609
Speaker 2: they are adopting a gradual approach to manage the negative

117
00:06:44,619 --> 00:06:47,738
Speaker 2: spill overs on inflation and growth. But I think also

118
00:06:47,750 --> 00:06:50,010
Speaker 2: the reason they did, there was no mention is because

119
00:06:50,019 --> 00:06:54,399
Speaker 2: the government's central database pau which will be a key

120
00:06:54,410 --> 00:06:58,079
Speaker 2: tool to determine who is eligible for subsidies based on

121
00:06:58,089 --> 00:07:00,409
Speaker 2: households net disposable income. Now

122
00:07:00,540 --> 00:07:02,919
Speaker 2: that database I think isn't ready yet and it's supposed

123
00:07:02,928 --> 00:07:05,678
Speaker 2: to go on trial next month. So once they have

124
00:07:05,690 --> 00:07:08,559
Speaker 2: the system in place, then it's possible they may announce

125
00:07:08,570 --> 00:07:11,329
Speaker 2: targeted subsidies for 1 95 next year.

126
00:07:11,970 --> 00:07:14,790
Speaker 1: They are projecting federal government debt to be around 64%

127
00:07:14,799 --> 00:07:16,769
Speaker 1: of GDP by the end of next year, that's higher

128
00:07:16,779 --> 00:07:22,250
Speaker 1: than 1.15 trillion or 61.9% of GDP that was estimated

129
00:07:22,260 --> 00:07:26,540
Speaker 1: in 2023. Should we be worried about this trajectory? And

130
00:07:26,549 --> 00:07:30,239
Speaker 1: is the consequences of this less money for development?

131
00:07:31,579 --> 00:07:34,760
Speaker 2: Yes, I mean, for the size of Malaysia's economy, having

132
00:07:34,769 --> 00:07:39,130
Speaker 2: a debt to GDP continuously above 60 60% does make

133
00:07:39,140 --> 00:07:43,309
Speaker 2: the country more vulnerable during a crisis as debt levels

134
00:07:43,320 --> 00:07:46,019
Speaker 2: already high to begin with. And also it puts your

135
00:07:46,029 --> 00:07:51,160
Speaker 2: sovereign ratings and outlook more susceptible to downgrades right now

136
00:07:51,170 --> 00:07:55,859
Speaker 2: because 99% of the country's revenue goes mostly towards financing

137
00:07:55,869 --> 00:07:57,239
Speaker 2: operating expenditure.

138
00:07:57,959 --> 00:08:01,309
Speaker 2: This means that development spending has to be financed through debt.

139
00:08:01,510 --> 00:08:04,329
Speaker 2: So if nothing changes for revenue, like we don't see

140
00:08:04,339 --> 00:08:08,559
Speaker 2: increased revenue and operating expenditure continues to rise and the

141
00:08:08,570 --> 00:08:11,049
Speaker 2: size of the economy stays the same. Then the only

142
00:08:11,059 --> 00:08:13,779
Speaker 2: way to cut debt is to cut development spending.

143
00:08:14,320 --> 00:08:17,480
Speaker 2: So we do hope that the additional revenue enhancements, the

144
00:08:17,489 --> 00:08:21,019
Speaker 2: tax increases and so on would go towards more supporting

145
00:08:21,029 --> 00:08:23,579
Speaker 2: development spending. And Juliet we just have a minute with,

146
00:08:23,589 --> 00:08:26,440
Speaker 2: you want to get your perspectives on the GDP forecast, right?

147
00:08:26,450 --> 00:08:29,529
Speaker 2: Because prem that three and forecasting the economic expansion of

148
00:08:29,540 --> 00:08:32,289
Speaker 2: 4 to 5% do you think that's realistic?

149
00:08:33,450 --> 00:08:38,059
Speaker 2: We are projecting 4.6% GDP growth for next year? So

150
00:08:38,070 --> 00:08:40,189
Speaker 2: I think 4 to 5% range is reasonable.

151
00:08:40,619 --> 00:08:44,559
Speaker 2: Despite the external challenges, we are cautious about the effects

152
00:08:44,570 --> 00:08:50,349
Speaker 2: of higher rates globally, of China's recovery, recent escalation of

153
00:08:50,359 --> 00:08:54,710
Speaker 2: tensions in geopolitics in Middle East potential upside for all

154
00:08:54,719 --> 00:08:57,848
Speaker 2: prices and domestically, I think key to what will be

155
00:08:57,859 --> 00:09:01,450
Speaker 2: the implementation of the targeted subsidies and higher services tax,

156
00:09:01,460 --> 00:09:04,979
Speaker 2: how that would affect sentiment and consumer spending because the

157
00:09:04,989 --> 00:09:09,079
Speaker 2: government is projecting a 5.7% private consumption growth next year.

158
00:09:09,520 --> 00:09:11,359
Speaker 1: Alright, thank you very much for your time. That was

159
00:09:11,369 --> 00:09:15,739
Speaker 1: Julia Goh, senior economist at U Malaysia. So she says

160
00:09:15,750 --> 00:09:18,799
Speaker 1: clearly the budget is true somewhat to its label. But

161
00:09:18,809 --> 00:09:23,000
Speaker 1: as usual implementation and execution is what we're going to

162
00:09:23,010 --> 00:09:24,960
Speaker 1: keep an eye on, right? Because

163
00:09:25,539 --> 00:09:28,030
Speaker 1: yeah, you can start out good. But whether you implement

164
00:09:28,039 --> 00:09:31,739
Speaker 1: it is another thing, plans plans at the moment, they have,

165
00:09:31,750 --> 00:09:35,510
Speaker 1: they have plans to have a monitoring committee. So we

166
00:09:35,520 --> 00:09:38,719
Speaker 1: will see. Yes, up next. What are the implications of

167
00:09:38,729 --> 00:09:41,859
Speaker 1: the tax measures and incentives in budget? 2024? We're going

168
00:09:41,869 --> 00:09:44,419
Speaker 1: to find out with the tax expert. Stay tuned. BFM

169
00:09:44,429 --> 00:09:49,719
Speaker 1: 89.9 this BFM budget 2024 special was brought to you

170
00:09:49,729 --> 00:09:54,280
Speaker 1: by Masing re invent spaces enhance life.

171
00:09:55,599 --> 00:09:59,699
Speaker 1: You have been listening to a podcast from BFM 89.9

172
00:09:59,710 --> 00:10:02,700
Speaker 1: the business station for more stories of the same kind.

173
00:10:02,710 --> 00:10:04,299
Speaker 1: Download the BFM app.