Malaysia’s 2025 Budget: Analysts Predict Subsidy Cuts and New Taxes Amid Fiscal Challenges

As Malaysia gears up to strengthen its fiscal standing, analysts and economists are forecasting key changes in the country’s upcoming 2025 budget. Prime Minister Anwar Ibrahim is expected to announce the new financial plan in parliament this Friday, focusing on fiscal consolidation while balancing economic growth and addressing the rising cost of living.

With government revenues projected to decline, largely due to lower dividends from the state-owned energy giant Petronas, Malaysia is likely to introduce further subsidy reductions and implement new taxes. Among the anticipated measures is a tax on high-value goods, which was first suggested in the previous budget. In addition, the government is expected to levy a tax on sugar-sweetened beverages, signaling its intent to broaden the tax base while promoting public health.

However, despite the ongoing fiscal pressures, it appears unlikely that Malaysia will reintroduce a broad-based goods and services tax (GST), which had been abolished in 2018. Although some experts have advocated for its return as a means of boosting government revenue, the administration is reportedly hesitant to impose a tax that could further strain household finances, especially in the face of rising living costs.

Prime Minister Anwar’s budget is expected to navigate these competing priorities—pushing for fiscal discipline while ensuring that economic growth remains robust and that vulnerable groups are shielded from the impact of subsidy cuts. The announcement will come amid an environment of heightened public interest, as Malaysians await concrete steps to address the economic challenges brought on by global and domestic factors.

The 2025 budget will be closely scrutinized for its approach to tackling fiscal imbalances, especially as Malaysia grapples with post-pandemic recovery and slower global economic growth. Additionally, how the government plans to mitigate the impact of rising living expenses while preserving its social safety net will be pivotal to its long-term economic strategy.