Kuala Lumpur:Budget 2027 effectively balances the needs of the rakyat with fiscal discipline, while structural reforms remain necessary for strengthening Malaysia's long-term fiscal position, according to economists.
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 "clever," noting that Finance Minister and Prime Minister Datuk Seri Anwar Ibrahim achieved various objectives. Despite expectations of election-focused spending, the budget managed to reduce the fiscal deficit to 3.3 percent in 2027, following good GDP growth projections.
However, Ong emphasized the need for further fiscal reforms, particularly in the tax system and fuel subsidies. He highlighted potential pressure on government finances due to higher oil prices and the possibility of fuel subsidy expenditures exceeding RM40 billion. Additionally, infrastructure-related liabilities, including the East Coast Rail Link (ECRL) repayments starting next year, could further challenge fiscal stability.
On the investment front, Ong noted the potential for Malaysia to attract more foreign direct investment (FDI) with greater clarity on investment policies. He pointed to the Johor-Singapore Special Economic Zone (JS-SEZ) as an initiative that could benefit from clearer guidance, with details expected from the Malaysian and Singaporean prime ministers in December.
Ong also stressed the importance of ensuring that investments benefit local businesses and workers. He mentioned the Malaysian Investment Development Authority's (MIDA) new incentive framework, which encourages foreign investors to contribute to local job creation and strengthen supply chains.
Senior ASEAN and India economist at OCBC Bank, Lavanya Venkateswaran, remarked that the budget leaned on the outcomes of past reforms to support investment, particularly in sectors like semiconductors and artificial intelligence. She noted that the budget focused on households and cost-of-living measures, with limited new incentives for larger corporations.