NST: 2024 Budget, RS-1 to drive Selangor's economic growth

‍

KUALA LUMPUR: Selangor's 2024 Budget and Rancangan Selangor 1 (RS-1) may boost the state's gross domestic product growth above 4.5 per cent next year, said MIDF Research.

The state government tabled an expansionary budget for 2024 recently, with a total allocation of RM2.53 billion or 3.3 per cent more than 2023.

MIDF Research noted that the state government expects an average annual growth rate of 6.5- 7.0 per cent a year for the period of 2021-2025 under the RS-1, higher than the forecast made under the 12th Malaysia Plan Mid-Term Review (12MP-MTR) at 4.7 per cent for 2023-2025 and 6.2 per cent for 2021-2025.

"With various pro-growth initiatives, we are optimistic of the ability of the golden state of Selangor to expand beyond 4.5 per cent in 2024. In addition, the RS-1 targets are crucial for the state as well as Malaysia due to the golden state economic size.

"The themes, strategies and targets will shape the new landscape for the state economy and be beneficial for Malaysia's macroeconomic performances and financial market," it noted.

Of the RM2.53 billion, about RM1.2 billion or 47 per cent of the total expenditure, will be spent for development expenditures (DE). Operating expenditure is expected to increase by 6.4 per cent to RM1.33 billion for 2024.

The state revenue collection may improve by 7.6 per cent in 2023, up 20 per cent from the initial estimate. However, the state income is projected to be lower by 8.5 per cent to RM2.2 billion in 2024.

In terms of budget balance to GDP ratio, Selangor's fiscal deficit is set to be at -0.1 per cent for next year.

"We view the state budget for 2024 as comprehensive and holistic, consisting of both economic growth and sustainable development. For instance, 2.5 months bonus payments for the state civil servants is seen pro-growth and provide significant relief especially with the high cost of living pressure.

"The budget focuses on basic infrastructure including roads, bridges and water-related projects. Also, the government promotes environmental, social and governance practices, among others change of state official cars to electric vehicles starting next year and installation of renewable energy infrastructure via Air Selangor to reduce carbon footprint," stated MIDF Research.

Selangor contributed 22.8 per cent to national GDP in 2015. After half a decade, the contribution increased to 25.5 per cent by 2022.

This ratio is higher than the target rate mentioned in the Midterm Review of 12MP of 25.1 per cent by 2025.

"Steady economic expansion in Selangor while other states grow at a relatively slower pace are the factors contributing to the GDP ratio surge. Since 2016, GDP growth in Selangor has outperformed national economic growth.

"We opine the resiliency of the state economy lies on the strength of its diversified manufacturing sector and huge consumer demand. Judging from the contribution rate, Selangor plays a greater role in fueling national growth as well as socioeconomic development," it noted.