KUALA LUMPUR (Oct 9): Economists and research analysts have broadly welcomed Budget 2027’s tax relief, cost-of-living support and fiscal consolidation, but cautioned that delivery, subsidy reform and the risk of fiscal slippage will determine whether its targets are met.

Here are their key reactions after Prime Minister Datuk Seri Anwar Ibrahim tabled the government's proposed spending bill for next year in Parliament on Friday:

Group CEO, Malaysian Rating Corporation Bhd

We welcome the higher allocation for development expenditure at RM83 billion. Continued investment can strengthen Malaysia’s productive capacity, while also creating opportunities for greater private sector participation. 

The focus should therefore not only be on the size of the allocation, but also on the quality and effectiveness of spending and its ability to generate longer-term economic returns.

The strengthening of revenue mobilisation is also encouraging. The gradual shift towards a broader, more sustainable revenue base should help strengthen Malaysia’s fiscal position over time. 

Furthermore, revenue has become more diversified, with contributions from both petroleum-related and other taxes.

We welcome the government’s efforts in strengthening the care economy as Malaysia prepares for an aged society. 

The proposed Senior Citizens Bill, the reduction in service tax on elderly care services from 8% to 6% from 1 January 2027, and the full tax exemption for care fees of up to RM96,000 a year are important steps towards strengthening protection for older persons and easing the cost of care. 

In addition, more than RM40 million has been allocated to build capacity for care economy, while two integrated care centres in Penang and Sarawak will support training, research and elderly care provision.

Budget 2027 strengthens Malaysia’s industrial ecosystem and counterbalances dependence on trade-exposed FDI by deploying government and GLIC direct funding, expanded guarantees, and targeted tax reliefs to upgrade domestic semiconductor and manufacturing firms. 

Malaysia does not lack talent, but rather it needs stronger structural mechanisms to ensure that our talent is fully recognised and valued. The consistent focus on elevating our human capital through Bakat MADANI to create more quality jobs further supports the labour market for younger workers. 

Furthermore, it is essential to empower the micro, small and medium enterprises (MSMEs) through the RM200 million Sejahtera Madani grants, spurring economic advancement specifically for 40,000 women as they are the drivers of domestic economy. 

Initiatives in providing better access to financing, digitalisation, innovation and market expansion to penetrate the global value chain and markets via the RM6.6. billion micro-financing schemes through Amanah Ikhtiar Malaysia, Tabung Ekonomi Kumpulan Usaha Niaga and Bank Simpanan Nasional  should also be aggressively championed.

CEO, Center For Market Education

Mandating a higher minimum wage does not make workers more productive. The likely consequences are fewer hours, fewer hires of young and low-skilled workers, a shift to informal work, and higher prices passed on to consumers. The RM2,500 graduate floor is the riskiest: if employers do not value a fresh graduate at that level, the result will be fewer graduate jobs, not higher pay.

Budget 2027 lowers some tax rates but leaves the tax system as complex as before, and in places more so. New Global Services Hub companies receive a 5% rate, the Reinvestment Allowance is being made more targeted, and individual reliefs expand into further categories of spending. Each carve-out narrows the tax base and rewards firms that are good at navigating officials.

Two structural problems remain unaddressed. First, the SST still has no general input tax credit, so tax accumulates along the supply chain. Second, there is no reform of CP204 instalment estimates or refund times. 

Businesses that overpay instalments or wait for refunds are effectively lending to the government at zero interest, which hurts their working capital.

Senior economist and economist, UOB Group

Overall, Budget 2027 prioritises implementation and policy continuity over major new reforms.

Rather than introducing significant new fiscal measures, the budget focuses on consolidating ongoing reforms, improving policy execution and strengthening institutional effectiveness.

The government has chosen to provide policy stability for businesses while maintaining targeted support for households amid cost pressures. This measured approach supports economic activity without materially derailing fiscal consolidation efforts.

Nevertheless, growth prospects are still contingent upon geopolitical developments, energy prices and supply security, trade fragmentation, financial stability including ringgit movement, climate risks, and potential adjustments to domestic price-administered prices, utilities or subsidy mechanisms. 

The downside risks have been less protracted than earlier expected against a backdrop of resilient domestic growth and an expansionary budget for 2027. Hence, we think this strengthens the case for a 25 basis points increase in the overnight policy rate. Such a move represents a normalisation of monetary policy following the OPR cut last July.

Senior Asean economist, OCBC Group Research

Expenditure restraint depends on a degree of subsidy and social assistance rationalisation in a year when the budget itself has earmarked funding for a potential general election. 

We expect the subsidy bill will remain unchanged from 2026, especially since the fuel price assumption and cash assistance packages remain similar. 

We also forecast a marginally higher rate of emolument growth, consistent with recent historical precedence. These suggest that operating expenditures will be larger than budgeted. 

As such, our baseline view remains that fiscal slippage could amount to 0.2-0.3% of GDP in 2027, leaving the fiscal deficit closer to 3.5%-3.6% of GDP.

Any potential fiscal slippage will bring the debt dynamics into focus. As at end-June 2026, the federal government debt stood at 63.1% of GDP, with the authorities focused on lowering the debt-to-GDP ratio to the medium-term threshold of 60%. 

Notwithstanding, as the Economic Report 2027 noted: “A strong domestic institutional investor base reinforces a resilient financial market as demonstrated by a sizeable resident holding” of 78.5% of total outstanding debt (as of 2Q26) while non-resident debt was “generally stable” at 21.5% of total outstanding debt.

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