For years, many have not seen the kind of expansionary Malaysian budget as we did in this year.
With the Malaysian General Election (GE14) approaching, Budget 2018 made way for a “redress of the rakyat’s most pressing and immediate concerns” by putting structural problems on a temporary hold.
The overall improving economy and consumer sentiment warrants a people-friendly Budget 2018 and is also the last Budget before the 14th General Elections (GE14) are due on or before Aug 2018.
As such, the Malaysian government worked towards lifting some of the burdens that locals have faced over the years, particularly in the wages, housing, healthcare, and infrastructural areas.
Budget’s impact on industries
1. Retail, consumer, retail REITs
One of the biggest surprises in the 2018 Budget for CIMB Research was the reduction in personal income tax, benefitting the retail, consumer, retail-based REITs and F&B sectors.
Income tax rates will be lowered by 2.0%, for individuals with taxable incomes of between RM20k and RM70k per annum, which will raise the disposable income of the individuals by RM300 to RM1,000.
CIMB Research expects that to add about RM1.5 billion back to the taxpayers while civil servants will receive RM1,500 and government retirees half of that amount.
To deliver 258,000 units of affordable housing through various initiatives, the Malaysian government allocated RM2.2 billion to help both local and private property developers.
Out of which, police personnel and other civil servants should benefit in the following years, apart from the other regular citizens.
Mega infrastructure projects in Malaysia remains the key highlight in Budget 2018, despite net development expenditure being flat at RM45.4 billion.
The re-affirmation of key projects (MRT 3, High-Speed Rail, East Coast Railway, LRT) worth RM175 billion and the RM6.5 billion budget for rural development are set to keep Malaysia contractors busy until 2026.
With further plans to upgrade and expand airports and many to-be-confirmed projects, Malaysian construction plays are expected to benefit.
Besides the major players, Deutsche Bank Research expects smaller contractors like Sunway Con, George Kent, AZRB, Muhibbah and WCT to benefit.
The Malaysian government raised the budget for health care by 7.1% increase in and CIMB Research notes that this will benefit pharmaceutical players such as Pharmaniaga.
The healthcare players in the medical tourism space should also benefit from other incentives by the Malaysian government, such as IHH and KPJ Healthcare.
At the same time, aviation, hotel, F&B, shopping mall and transportation industries will also benefit from the government’s initiatives to boost medical tourism in Malaysia.