CARI Captures Issue 595: Main features of Malaysia’s 2023 budget

Malaysia’s 2023 budget focuses on MSMEs and redistributive taxation
(25 February 2023) On 24 February, 2023, the Malaysian government introduced its budget for fiscal year 2023, with a focus on supporting MSMEs and redistributive taxation. Regarding support for the poor, the government allocated US$169 million to upskill workers under a pilot programme dubbed the People’s Income Initiative. The government also set aside US$559 million in direct cash aid for the poor, benefitting more than 400,000 recipients. In terms of support for MSMEs, the budget allocates US$74 million for micro and small businesses. The budget also reduces the income tax for middle class Malaysians by up to 2%, while also raising the income tax for wealthy Malaysians by 2%. A new tax on luxury goods will also be introduced, while the government are also mulling introducing a capital gains tax from 2024 onwards. Excise duty will also be introduced on vape products.

Authorities approve Tesla’s application to import battery electric vehicles into Malaysia 
(01 March 2023) The Malaysian government has approved Tesla’s application to import battery electric vehicles (BEVs) into Malaysia, as well as establish a head office, a Supercharger network, and an experience and service centre. Tesla’s presence in Malaysia is expected to create skilled and higher-paying job opportunities for workers in the BEV segment, while increasing the participation of local automobile companies in Tesla’s ecosystem both domestically and globally. Tesla’s entry into Malaysia is facilitated through the BEV Global Leaders initiative, which aims to help boost BEV demand in the local market and further promote the development of the entire BEV ecosystem. Malaysia hopes to leverage its established electrical and electronics ecosystem to make it a preferred investment destination for technology related to electric mobility.

Malaysia expecting ‘drastic’ increase in number of Bruneian tourists visiting country
(26 February 2023) Malaysian authorities are expecting a ‘drastic’ increase in the number of Bruneian tourists visiting Malaysia, attributing this to the re-opening of the Brunei-Malaysia land and sea borders by Brunei in 2022. According to the Malaysian High Commissioner to Brunei Darussalam, Datuk Raja Reza Raja Zaib Shah, the Malaysian state of Sarawak plays a key role in bilateral relations. The envoy said the regular exchange of visits at all levels is vital to increased cooperation between both countries. Sarawak is looking to deepen its trade and investment relations with Brunei Darussalam, as well as collaborate in the areas of agriculture and tourism. Trade between Malaysia and Brunei Darussalam stood at US$2.95 billion in 2022, compared to US$1.79 billion in 2021.

Capital expenditure and tourism rebound to fuel Thailand’s expansion in 2023
(28 February 2023) Capital expenditure and a rebound in tourism will fuel Thailand’s growth in 2023, despite the headwinds caused by weaker exports and a possible delay in the budget for next fiscal year. The Thai government has recently approved three projects at a combined investment of US$14.9 billion, including a high-speed railway line connecting three airports, an expansion of an airport southeast of Bangkok, and a deep seaport. In terms of tourism, foreign arrivals to Thailand topped 2 million for the second straight month in January 2023. Because of these factors, Thailand’s government is sticking to its forecast of 3.8% GDP growth in 2023, even after factoring in a below-par performance in the last quarter of 2022. Headline inflation is expected to moderate to a range of 3% to 4% later in 2023 from a 14-year high of 7.86% in August 2022 as global energy and commodity prices ease.

Indonesian President launches construction of US$2.6 billion hydropower plant in North Kalimantan province
(01 March 2023) On 01 March, 2023, the Indonesian government launched the construction of a US$2.6 billion hydropower plant in North Kalimantan province. Named Mentarang Induk, the plant is being developed by PT Kayan Hydropower Nusantara, a joint venture between Indonesian companies PT Adaro Energy Indonesia and PT Kayan Patria Pratama Group and Malaysian company Sarawak Energy Bhd. The plant will be linked to a planned industrial park that will house electric vehicle and battery plants, as well as aluminum and petrochemical facilities. The plant is expected to take seven years to construct. While Indonesia is a major thermal coal producer and relies on coal as its main source of power, the country has pledged to move away from the fuel before 2060.

Inflation may remain at 14-year high in February 2023, pressuring central bank to sustain aggressive monetary tightening
(28 February 2023) Inflation in the Philippines may remain at a 14-year high in February 2023, putting pressure on the Bangko Sentral ng Pilipinas (BSP) to sustain its current course of aggressive monetary tightening. Consumer prices are expected to rise anywhere within the range of 8.5% to 9.3% year-on-year in February, compared with the 8.7% rise recorded in January, the fastest since November 2008. The BSP has raised rates by 400 basis points since May 2022. While the BSP’s governor recently stated that there was scope for the BSP to slow rate increases to a quarter point in March 2023, central bank officials have maintained their readiness to take action against rising inflation expectations. In contrast, Indonesia and Malaysia have paused rate increases amid signs of easing inflation.

Viet Nam slashes retail prices of gasoline and other oil products by up to 2.7%
(02 March 2023) Viet Nam has slashed the prices of gasoline and other oil products by up to 2.7% in the second reduction in 2023 due to a recent drop in global oil prices The changes took effect on 28 February, 2023. Gasoline prices dropped by 0.52% to 23,320 Vietnamese dong per litre for RON95 bio-fuel and 22,420 Vietnamese dong for E5 RON92. Diesel prices went down by 2.7% to 20,250 Vietnamese dong per litre, and kerosene fell by 1.8% to 20,470 Vietnamese dong. According to the General Statistics Office, Viet Nam imported about 1.9 million tonnes of oil products from January to February 2023, up 43% from the same period in 2022. Gasoline and diesel accounted for most of the imports of Viet Nam.

RCEP Monitor

Factory output falls by 4.6% m-o-m in January 2023, representing fastest contraction in eight months
(01 March 2023) Factory output fell by 4.6% month-on-month in January 2023, representing the fastest contraction since May 2022 when output fell by 7.5% due to China’s COVID-19 lockdown disrupting Japanese manufacturers’ supply chains. The drop in factory output in January was attributed to declining overseas demand taking a heavy toll on critical industries such as auto and semiconductor equipment, and follows a revised 0.3% expansion in December. In comparison, retail sales rose by 6.3% year-on-year in January, posting an 11th consecutive month of expansion. This is the fastest growth since May 2021. On a month-by-month basis, retail sales expanded 1.9% in January, following a 1.1% rise in December 2022.

Economy grows at weakest pace in a year in last quarter of 2022 
(01 March 2023) Australia’s economy grew at its weakest pace in a year in the last quarter of 2022. According to data by the Australian Bureau of Statistics, without the sizeable contribution from trade, the economy would have actually contracted in the last quarter as rising prices eroded consumer purchasing power and led Australians to save less. Real GDP rose by 0.5% in the last quarter, compared to 0.7% in the previous quarter. Annual growth stood at 2.7%. Meanwhile, domestic prices rose at the strongest annual pace since early 1990, with services inflation fueled by a shortage of skilled workers and rising labour costs. Inflationary pressures have led to the Reserve Bank of Australia to raise its cash rate by 325 basis points since May 2022.

Number of working people falls by more than 41 million in the past three years
(02 March 2023) The number of working people in China has dropped by more than 41 million in the past three years, reflecting both the impact of COVID-19 and an ageing population. According to China’s statistics bureau, some 733.5 million Chinese people were employed in 2022, down from 774.7 million in 2019. The drop in employment numbers in 2022 was primarily driven by demographic changes, as the population reaching the retirement age of 60 rose significantly. The number of working-aged people in China (those aged between 16 and 59) has been gradually declining since 2012. In the past three years, the number in that group has dropped by 38 million to 857.6 million.

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