Malaysia’s Construction Sector Faces Budget Challenges

In ahead of the approaching amended Budget 2023, analysts have given the construction industry a “neutral” assessment. PETALING JAYA

The government’s potential increase in development expenditure (DE) allocation in 2024 and 2025 to meet the RM400 billion planned DE under the 12th Malaysia Plan (12MP) is one potential sector catalyst, according to RHB Research. Another is the faster-than-anticipated rollout of Mass Rapid Transit 3 (MRT3).

Before the Budget 2023 was presented and only RM2.1bil in employment were given in January, the research firm stated in a report to clients that it maintained its “neutral” call on the industry.

We reiterate Kerjaya Prospek Bhd and Sunway Construction Group Bhd as our sector’s top picks because of their efforts to diversify their business operations by focusing on industrial-related employment rather than infrastructure and residential construction.

RHB Research said in the research that Malaysia’s DE’s rationalisation is still a contentious issue.

“Our economics team believes that the amended Budget 2023 has a little chance of implementing meaningful tax policy revisions. We believe that MRT Corp Bhd’s in-depth analysis of the MRT3 track alignment may have an impact on about RM34 billion in upcoming civil construction projects for contractors,” it stated.

Citing economic projections from the Finance Ministry, it stated that the entire DE for 2021 and 2022 was about RM136 billion, leaving about RM264 billion for 2023 and 2025.

Despite the potential catalysts, the construction industry is still facing some challenges, including the ongoing COVID-19 pandemic and rising costs of building materials. These factors could impact the industry’s performance in the near future.

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Source: TheSTAR