The economic challenges the new Malay government will face

When the new government finally settles in Putrajaya, its leaders will have little time to celebrate their rise to power. That’s because the newly formed cabinet will have to immediately address several serious economic challenges facing the country, as the first thing on the agenda is for the new finance minister to oversee the drafting of a new set of budget proposals for 2023.
Regardless of which coalition comes to power, the new government faces three key economic challenges The top economic priority for the new government is to present a budget in a very tight timeframe. Such populist measures must be abandoned in favor of a clear, credible budget that focuses on sustainable growth and price stability and avoids creating inflation and the higher interest rates that come with it. Fiscal consolidation does not mean austerity, and the overall budget is likely to be roughly the same as in 2022, increasing to about RM345 billion due to inflation. This is still a record-breaking budget.

Revenues should also be comparable to 2022 at about RM285 billion and the government should maintain the RM50 billion oil royalty based on oil prices as much as possible.
Financial markets will be cautious in the week ahead, but will move on when the government and cabinet are finalized. The RM is already firmer than it was before the election. In any case, policy should never be made by the stock market and the financial markets.
Even if economic uncertainty and headwinds intensify next year, the Malaysian economy is expected to achieve positive growth relatively unscathed.

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