SST base expansion a prudent fiscal move, says RHB IB
KUALA LUMPUR: The expansion of Malaysia's Sales and Service Tax (SST) base is a carefully considered policy decision that balances fiscal responsibility with economic stability, according to RHB Investment Bank Bhd (RHB IB).
The bank described the move as a measured approach to reinforce the country's fiscal position while minimising negative impacts on growth, inflation, and consumer spending. 'We maintain Malaysia's 2025 inflation forecast at 2.2 per cent, reflecting a gradual and orderly implementation of fiscal retargeting measures alongside moderate demand-side pressures,' RHB IB said in a research note.
On trade performance, the bank noted early signs of weakening export momentum in ASEAN. Malaysia's May exports fell by 1.1 per cent year-on-year (y-o-y), missing market expectations of a 7.5 per cent increase and the bank's own five per cent projection. Similarly, Singapore's non-oil domestic exports unexpectedly declined by 3.5 per cent y-o-y.
Globally, RHB IB observed a slight economic upturn in the second half of 2025, driven by easing trade tensions. Market sentiment has improved, with the RHB Risk Sentiment Index rising and global equity inflows recovering. 'If this trend holds, expectations of fewer Federal Reserve rate cuts, sustained risk appetite, and upward GDP revisions are reasonable,' the bank stated.
However, risks remain as tariff suspensions are set to expire soon—July 8 for non-China trade and August 12 for China. Uncertainty over extensions could trigger market volatility. 'We maintain a tactical overweight in equities and market weight in fixed income through August but stand ready to shift to safe havens if trade risks resurface,' RHB IB added.
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