Malaysia’s 2027 Budget: Fiscal Consolidation Continues Apace — SkimNews
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- Malaysia is forecast to grow around 5% in 2026 and at a similar rate in 2027, with manufacturing and digital-services investment flowing in, booming exports producing large current-account and trade surpluses and inflation remaining stable.
- Malaysia’s deficit is projected to narrow from 3.6% of GDP in 2026 to 3.3% in 2027, the lowest since 2017 and down from 6.4% in 2021.
- Malaysia’s approved spending rises 3.7% year over year to 458 billion ringgit ($112 billion) in 2027 even as fiscal consolidation continues.
- Petronas dividends and petroleum-related taxes supplied 32% of government revenue in 2019, falling to 15% in 2026 and remaining near that level in 2027; more than 80% of revenue now comes reliably from non-petroleum sources, mainly taxes.
- The sales and service tax is expected to contribute 73 billion ringgit ($18 billion) in 2027, with its revenue share rising from 10.5% in 2019 to 19.2% after a recent tax hike.
- Malaysia targets roughly $18 billion for subsidies in 2027, about the same as in 2026, mainly to cushion consumers from spiking energy prices while still narrowing the deficit.
Why it matters: Malaysian fiscal planners gain revenue certainty from the sales and service tax, projected at 73 billion ringgit, preserving room for 458 billion ringgit of spending even with the 2027 deficit projected at 3.3% of GDP. Much of the roughly $18 billion in subsidies cushions consumers from spiking energy prices, so consolidation does not come at their immediate expense.
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