KUALA LUMPUR:  An allocation of RM403.7 billion is expected for Budget 2025, comprising operating expenditure of RM305.7 billion and development expenditure of RM97.9 billion, according to TA Securities Holdings Bhd.

In a report, it said stronger revenue growth versus spending would lead to a lower fiscal deficit of RM76.4 billion, or 3.7 per cent of gross domestic product, in 2025, versus its forecast of 4.2 per cent in 2024, and is on target to achieve the government's 3.5 per cent target in 2026.

"This will be supported by economic expansion, which we forecast to grow at a faster clip of 5.0 per cent in 2025.

"It would be driven by the services and manufacturing sectors, and supported by a stable labour market, wage increases, and private investments," it said.

TA Securities also predicted that government revenue will increase by 5.7 per cent to RM325.3 billion in Budget 2025, versus RM307.6 billion in 2024.

The rise in government revenue was due to a 4.2 per cent rise in direct taxes, and an 11.7 per cent gain in indirect taxes, as the economy continues to grow at a faster pace, businesses prosper and incomes rise.

"No new taxes are expected next year, apart from the 15 per cent global minimum tax and the already delayed high-value goods tax, besides enforcing phase-by-phase e-invoicing implementation, due to enter the final stage in 2025, and the broadening of the sales and services tax.

"This would compensate for a possible lower dividend payout by Petronas due to the foregone revenue from its East Malaysia operations. 

Meanwhile, TA Securities anticipated that Budget 2025 would address key measures and potential beneficiaries in certain fields, such as big-ticket public infrastructure projects like the Mass Rapid Transit 3 (MRT3) and high-speed rail (HSR), equitable development, and new growth corridors like the Johor-Singapore Special Economic Zone.

It would focus on spending on the digital economy and sustainable development initiatives related to energy transition and renewable energy.

The stockbroking company also said the National Semiconductor Strategy, high-value-added exports, and investments related to new technologies like artificial intelligence, the cloud, and 5G would be included in Budget 2025.

"It is expected to have measures to lower the cost of living and boost disposable income via civil servant salary increases, a possible adjustment to minimum wages from RM1,500 to between RM1,700 and RM1,800, and increases in tax reliefs or rebates.

"This will mitigate any negative impact of possible higher taxes on sugary food items," the house said.