KUALA LUMPUR, Jan 9 — The federal government is pressing ahead with critical reforms that could benefit the economy but this could expose Prime Minister Datuk Seri Anwar Ibrahim’s administration to mounting challenges this year, said the BMI outfit.
The Fitch Solutions subsidiary said that while Anwar’s approval rating rose to 54 per cent at the end of last year, it indicated that there was divided opinion on his economic efforts, particularly in light of the rising cost of living.
“However, the tight spread between the positives and negatives when voters were asked about Anwar’s efforts to strengthen the economy illustrates ongoing concerns surrounding the cost of living, while the impending RON95 petrol subsidy cuts due by the middle of 2025 will pose a further head,” it said in a research note.
Malaysia plans to do away with blanket RON95 subsidies this year after withdrawing the same for diesel in 2024, which is expected to cause a spike in inflation that policymakers hope will be temporary.
Although the fiscal deficit is expected to narrow to 3.8 per cent of GDP in 2025, the reform agenda includes tough decisions that could test Anwar’s political strength, BMI said.
It also not that while Budget 2025 includes measures such as expanding the sales and services tax (SST) to cover B2B commercial transactions, the greatest political risk was the RON95 withdrawal that could alienate voters who have grown accustomed to government support for their daily expenses.
The move will also give the ruling coalition just two years until the next general election to win voters back aggrieved by the rationalisation.
Growing disagreements within the ruling coalition could also hamper Anwar’s momentum in pursuing his anti-corruption agenda, BMI said when noting limited progress in this area over the past two years.