AMBANK Economic Research has revised upward its forecast of government revenue this year to RM292 billion – based on the Budget 2023 announcement yesterday – compared to the previous estimate of RM272.6 billion.

Tax revenue will be the largest contributor to government revenue, with a 74.9% contribution, it added.

“Petroleum income tax revenue is expected to be higher compared to the previous budget, an increase of 12.7% to RM18.2 billion, with the Finance Ministry’s Brent oil price assumption of US$80 (RM355) per barrel in 2023,” the research house said in a note.

The financial deficit ratio is expected narrow to 5.0% of gross domestic product (GDP), which is smaller than the 5.2% of GDP previously (in the first Budget 2023), “but overall it still reflects a mildly expansionary position”.

“As expected, there was no significant change relative to the previous Budget 2023 tabled on October 8, 2023.

“The B40 and M40 (income groups) are the winners given the cash handout worth RM8 billion and the tax cut for middle-income is also expected to benefit private consumption. Micro, small, and medium enterprises (MSMEs) will also gain front the loan grants and tax cuts,” it said.

Ambank said the Sumbangan Tunai Rahmah programme showed support for low- and middle-income households in cushioning them from the high cost of living and the impact of a potential slowdown.

“As a developing economy, there is still a need to continue to spend on crucial development sectors, especially on education to narrow the skills gap between employers and employees.

“Development spending on the healthcare sector is equally important as the population continues to grow.

“As such, we view that development expenditure shall continue to be maintained at an adequate level to ensure the economy remains close to its potential and supportive of the aspiration to transition towards a high-income economy,” it said. – Bernama, February 25, 2023.