- The government has little option but to increase its tax revenue in 2025, with an upward adjustment to the VAT tariff offering the highest chance of success, given the bleaker outlook for other sources of tax revenue.
- The higher VAT tariff may halt the recent improvement in household consumption, as the pass-through effect on retail prices, combined with the weak outlook for wage growth, could further slow household demand growth.
- The government will need to ensure timely spending realization following the VAT hike, as higher demand from lower-income households will be crucial to offset the foregone demand from better-off households.
