Kuala Lumpur:The newly announced Budget 2027 by Malaysia's Finance Minister and Prime Minister Datuk Seri Anwar Ibrahim aims to meet public needs while maintaining fiscal discipline. Economists emphasize the necessity of structural reforms to further strengthen the country's long-term fiscal position.
According to BERNAMA News Agency, former deputy Investment, Trade and Industry minister and Taylor's University adjunct professor Ong Kian Ming described the budget as a "clever" one, fulfilling various objectives. Despite expectations of it being an election budget with different handouts, the Finance Ministry managed to reduce the overall fiscal deficit to 3.3 percent in 2027, down from a projected 3.6 percent in 2026, supported by strong GDP growth numbers.
However, Ong expressed a desire for more progress on fiscal reforms, especially in the areas of tax systems and fuel subsidies. He noted that higher oil prices could strain government finances, particularly if fuel subsidy spending exceeds the projected RM40 billion. Additionally, higher financing costs and infrastructure liabilities could further impact the fiscal position. The upcoming repayment of the East Coast Rail Link (ECRL) costs next year could also contribute to financial pressures.
In terms of investment, Ong highlighted Malaysia's potential to attract foreign direct investment (FDI) if the government provides more clarity on investment policies and initiatives. He pointed to the Johor-Singapore Special Economic Zone (JS-SEZ) as a project that could benefit from such clarity, with details expected to be announced in December by the prime ministers of Malaysia and Singapore. Clear policies could enhance FDI inflows to Johor and Malaysia overall.
Ong also advised the government to ensure investments yield significant benefits for local businesses and workers. The Malaysian Investment Development Authority's (MIDA) new incentive framework, introduced earlier this year, employs a scorecard approach considering factors like local job creation to encourage foreign investors to engage more in the domestic economy and bolster local supply chains.
On data centers, Ong underscored the importance of ensuring that investments contribute more to the domestic economy. Lavanya Venkateswaran, a senior ASEAN and India economist at OCBC Bank, indicated that the budget largely relies on past reforms to support investment, particularly in the semiconductor sector with the adoption of artificial intelligence.
Lavanya noted that the budget primarily focuses on households and cost-of-living measures, with fewer new incentives for larger corporations.