Economics, Trade, and Regional Integration: Calvin Cheng, Hanson Chong, Jaideep Singh and Qarrem Kassim
Climate, Environment and Energy: Ahmad Afandi, Dhana Raj Markandu, Kieran Li Nair and Zayana Zaikariah
October 2024
Snapshot
The key initiatives announced as part of Budget 2025 across critical economic, social and environmental policy areas are listed below. More in-depth analysis of each initiative is provided in subsequent sections, accessible through the corresponding hyperlinks.
Fiscal policy and taxes
- Fiscal consolidation: Budget 2025 continues “soft-fiscal tightening”, prioritising revenue growth to reduce the deficit, aiming for a 3.8% deficit-to-GDP in 2025.
- Tax measures: expansion of the sales and service tax (SST) to luxury goods and services. Introduction of a 2% dividend tax on income above RM100,000.
- Development expenditure: shrinking as a share of GDP over the past two years, with concerns over the sustainability of development investments.
Subsidies and social protection
- Targeted subsidies: removal of RON95 petrol subsidies for the top 15% income group.
- Cash transfers: expansion of cash-assistance programmes (e.g., Sumbangan Tunai Rahmah), with a focus on the Sumbangan Asas Rahmah top-up programme.
- Social protection: incremental improvements to pension and social insurance coverage, but gaps remain for informal workers.
Industrial development and competitiveness
- New Investment Incentive Framework: targeted, performance-oriented incentives to promote high-impact investments.
- Electronics and semiconductors: new investments in hard and soft infrastructure for the electrical and electronics sector, including RM1.2 billion mobilised from Khazanah.
- MSME financing: RM40 billion for MSME-related loans and credit guarantees, with a focus on infrastructure, digitalisation and sustainability.
Work, education and training
- Progressive Wage Policy: full implementation in 2025 with RM200 million allocation but concerns over scalability.
- Education: major investments in preschool education and teacher training. Increased funding for skills development through TVET.
- Higher minimum wage: increased to RM1,700, aligned with labour reforms but regional disparities pose challenges.
Energy transition and low carbon development
- National Energy Transition Roadmap (NETR): focus on renewable energy and decarbonisation, with RM305.9 million allocation.
- Carbon tax: introduction by 2026 for high-emitting sectors (e.g., steel, energy) to support low-carbon technologies.
- Solar energy: extension of Net Energy Metering (NEM) programme to promote rooftop solar installation.
Climate and disaster-risk management
- Disaster-risk management: RM13 billion allocated for flood mitigation, infrastructure maintenance and geological-risk management.
- Ecological Fiscal Transfer (EFT): increased funding for biodiversity conservation at RM250 million.
- Marine conservation: RM3.3 million to improve marine ecosystem management.