Analysts of a market research firm expect rationalization measures (including the withdrawal) of targeted subsidies will not have significant negative effects on consumers and businesses.
TA Securities also said the government should continue to reduce subsidies and increase income despite political pressure to achieve the annual deficit target of 4.3 percent for 2024 compared to 5.0 percent in 2023. Deficit reduction is expected to increase confidence in the government’s ability to reduce deficit and debt.
They added, the Fiscal Responsibility Act states to achieve a three percent fiscal deficit target between 2026 and 2028.
TA Securities also expects a gradual increase in fuel prices at the pump.
An increase in the price of RON 95 petrol by 40 cents per liter can reduce subsidies by RM10 billion. It is based on the indication of a subsidy reduction of RM11.4 billion to RM52.8 million in the 2024 Budget.
Regardless, the firm said the B40 and M40 groups to a certain extent should receive cash assistance from the government to offset the negative impact of rising prices of petrol and other goods.
They also explained that those income groups will realize their purchasing power is smaller.
“For example, translating an increase of 40 sen as 20 percent based on the current price of RON95 at RM2.05 per litre, the average consumer who spends RM300 a month on petrol will see an increase of RM60 a month in their monthly bill,” he said.
TA Securities said, following the price increase following the implementation of the targeted subsidy, it is important for the government to focus on effective monitoring and enforcement of regulations. The move is to prevent unethical businesses and individuals from exploiting the situation by dramatically increasing the prices of their goods and services.
