Siena:The government has committed to gradually reducing the fiscal deficit to ensure a sustainable financial position. The target is to lower the deficit to 3.3 percent of the gross domestic product (GDP) by 2027.

According to BERNAMA News Agency, Treasury secretary-general Tan Sri Johan Mahmood Merican highlighted that the government anticipates a slight moderation in economic growth next year, partly due to global economic uncertainties. Despite this, unemployment is expected to remain low, although inflation rates might see a slight increase.

Johan emphasized the government's prudent fiscal policy, aiming for a fiscal deficit of 3.6 percent this year, with plans to reduce it further to 3.3 percent in 2027 and 3 percent in 2028. Additionally, the Federal Government's debt-to-GDP ratio is set to decrease from 65.2 percent in 2025 to 64 percent in 2026 and 63.7 percent in 2027.

Budget 2027 outlines a Federal Government expenditure increase to RM459.8 billion, compared to RM419.2 billion for Budget 2026. Including investments from government-linked investment companies, public-private partnerships, Federal Statutory Bodies, and the Minister of Finance Incorporated, total expenditure and investment will reach RM510 billion, up from RM470 billion in Budget 2026.

National fuel subsidies are projected to remain high at RM40 billion next year, balancing the need to protect citizens from living costs while improving the fiscal position. Johan noted that government spending aims to support economic growth and public welfare, but must also be managed prudently.

On the impact of the strengthening ringgit, Johan explained that a stronger currency does not automatically lead to lower prices for imported goods, as pricing is influenced by factors like market structure and competition. The Ministry of Domestic Trade and Cost of Living is focusing on increasing market competition to ensure consumers benefit from cost changes and exchange rate shifts.

Efforts are underway to simplify the import process in sectors with limited competition, which is expected to help consumers benefit from the ringgit's strengthening while maintaining responsible fiscal management. Following the presentation of Budget 2027, the ringgit strengthened against the US dollar on Monday morning, reflecting confidence in the government's fiscal policies.