Top priorities are incentives for green financing, tax reforms to attract investments and enhanced support for digital transformation

by NURUL NAJMIN ABU BAKAR

KEY players in the financial sector are urging the government to introduce measures that stimulate growth and resilience in Budget 2025.

Among the top priorities are incentives for green financing, tax reforms to attract investments and enhanced support for digital transformation. 

There is also a strong push for initiatives to address inflation, improve market access for small and medium enterprises (SMEs) and promote financial inclusion for low-income households.

South-East Asia Lead of the Global Labor Organisation and economist Prof Niaz Asadullah said Malaysia needs a fiscal system that promotes innovation in advanced sectors while supporting businesses and households at the lower end of the economic spectrum.

He said strategic fiscal measures, beyond ongoing tax and subsidy rationalisation efforts, can strengthen the economy’s resilience to external shocks and support job creation by raising funds, targeting them effectively and reducing fiscal wastage.

“Taxation efficiency must be improved to diversify revenue sources and reduce reliance on oil-related income through new taxes.

“This could include the introduction of carbon taxes, reconsideration of the Goods and Services Tax (GST), or the implementation of other forms of progressive taxation,” he told The Malaysian Reserve (TMR).

He added that budget allocations should be increased for green infrastructure, renewable energy (RE) and digital transformation, in line with the National Energy Transition Roadmap (NETR).

He noted that such sustainable investments can drive growth while positioning Malaysia for long-term resilience.

Niaz also suggested increasing budget allocations for the B40 group and the economy. 

“For SMEs and micro-SMEs (MSMEs), this means expanding financial support through grants, loans and incentives, while B40 households will benefit from enhanced social protection via cash transfers and targeted subsidies.

“The government should focus on targeted fiscal stimulus for vulnerable sectors or low-income groups, rather than broad-based measures, to protect the purchasing power of B40 groups without overstimulating overall demand,” he said.

He opined that fiscal initiatives that boost productivity in key sectors, such as agriculture and manufacturing, should be prioritised.

Additionally, Niaz suggested that the government should focus on spending for productivity-enhancing projects like infrastructure, education and skills training that yield long-term benefits, avoiding short-term cash injections that could risk overheating the economy.

“Effective monetary-fiscal coordination is also crucial, with fiscal measures needing to align with Bank Negara Malaysia’s policies to stimulate domestic consumption without driving excessive inflation,” he said.

Ensuring that qualified individuals receive financial aid, avoiding wastage and combating corruption are critical considerations for the government says Mohd Afzanizam (Pic courtesy of Bank Muamalat) 

Bank Muamalat Malaysia Bhd Chief Economist Dr Mohd Afzanizam Abdul Rashid said social protection, promoting private investment and enhancing productivity are the primary focuses for the upcoming budget.

He said maintaining financial discipline is equally important, as the government aims to reduce fiscal deficits to below 4% of GDP.

“This will require measures to rationalise expenditures and improve revenue collection,” he told TMR.

He said ensuring that qualified individuals receive financial aid, avoiding wastage and combating corruption are critical considerations for the government. 

“It is essential that every cent of expenditure and revenue collected is accounted for and all spending should generate desirable multiplier effects that benefit all citizens,” he added.

RHB Banking Group Acting Group Chief Economist Barnabas Gan said the banking industry expects a balanced and strategic budget that addresses immediate economic needs while laying a strong foundation for future growth. 

Key priorities include investments in critical infrastructure projects, particularly in transportation, utilities and digital infrastructure, which are essential for enhancing regional connectivity and stimulating economic activity across sectors.

“These efforts are vital for fostering long-term resilience, financial inclusion and driving Malaysia’s sustainable growth,” he said.

Apart from that, RHB also expects targeted measures to support underserved communities, particularly MSMEs and SMEs, which play a crucial role in supply and value chains. 

He stressed that special funds, loan guarantees and interest subsidies will be essential to ensure these businesses have access to financial services, enabling them to thrive in the current economic climate.

Gan noted that the banking industry is optimistic about increased support for green financing and sustainable initiatives, aligning with the Madani Economy Framework and the NETR.

“We anticipate enhanced tax incentives and financial policies that encourage both public and private sectors to adopt sustainable practices, particularly in RE and other ESG-related investments,” he said.

He added that green financing incentives, such as tax breaks for long-term green deposits and RE projects, are crucial for accelerating Malaysia’s transition to a low-carbon economy.

Given the ongoing challenges of rising living costs, RHB hopes to see more targeted relief measures to support individuals and businesses facing financial difficulties. 

These measures could include expanded subsidy programmes, affordable housing schemes and improved social safety nets,

Gan suggested that promoting financial literacy and accessible financing solutions will also be essential in helping consumers manage inflationary pressures and fostering prudent financial habits. 

He anticipates Budget 2025 to offer an opportunity for stakeholders across industries to collaborate in promoting sustainable growth and financial inclusivity. 

“A strategic, forward-thinking approach will enable Malaysia to navigate global economic uncertainties while positioning the nation for continued prosperity and resilience,” he said.

Meanwhile, CIMB Co-Chief Executive Officer of Group Commercial and Transaction Banking, Ahmad Shazli Kamarulzaman, said in a recent conference that while they do not want to be overly presumptuous, they believe the budget will improve, particularly for the SME sector, noting that some elements from previous years have not entirely faded away.

“Based on our analysis and previous budgets, we anticipate that the government’s support for SMEs will persist, but with a sharper focus on those who truly need assistance.

“It is crucial to direct resources toward those most in need, as many currently receiving support may not require it. Furthermore, our engagement with SMEs has provided valuable insights, which we have shared with the Malaysian Retailers Association (MRA) to inform future policies and initiatives,” he said.