KUALA LUMPUR (Oct 15): With global disruptions now becoming the norm, Malaysia needs deeper fiscal buffers to withstand recurring crises such as geopolitical unrest, pandemics and climate shocks, said MARC Ratings Bhd chief economist Dr Ray Choy.
Addressing a post-Budget 2027 webinar on Thursday, Choy argued that so-called "black swan" events can no longer be treated as rare anomalies and should instead be standard considerations in government fiscal planning.
“Shoring up fiscal and flexibility is important so that ultimately, when you know the polycrisis does hit Malaysia, the country will have sufficient resources to deal with it,” said Choy.
While acknowledging that Malaysia has demonstrated resilience in navigating previous economic shocks, he warned against assuming that the country would be similarly insulated from future crises.
A prolonged period of elevated interest rates and bond yields could pose additional challenges to the country's fiscal position, he flagged, as he highlighted the possibility of borrowing costs remaining elevated for several years.
He pointed out that operating expenditure now accounts for roughly 82% of total government spending, leaving limited room to manoeuvre.
To expand fiscal headroom, he suggested broadening the tax base and refining targeted fuel subsidies.
During a recap session at the same event, MARC Ratings senior economist Kamal Zharif Jauhari shared the agency's projection that Malaysia's economy would grow by 5% in 2027, driven by sustained investment, semiconductor exports and resilient domestic demand.
Choy said sustained economic growth would support fiscal consolidation, but stressed that there is a pressing need to improve the government's capacity to absorb future shocks amid its growing expenditure commitments — Budget 2027 details the largest federal expenditure yet, at RM459.84 billion — and a more uncertain global financing environment.
The online panel discussion, held jointly by MARC Ratings and Moody’s Ratings, was themed MARC360: "Decoding Budget 2027 — The Economy and What Comes Next".
With Choy on the panellists were Ministry of Finance deputy undersecretary of macroeconomics sector Rozita Abd Matalib and KPMG Malaysia senior adviser on tax policy Dr Veerinderjeet Singh.
The session was moderated by Moody's Ratings credit strategy and guidance group vice-president Deborah Tan.