RHB IB sees RM83b development spending under Malaysia’s Budget 2027

RHB Investment Bank Bhd predicts total federal government allocation for Malaysia's Budget 2027 to be RM437.8 billion, with development expenditure rising to RM83 billion from RM81 billion in Budget 2026. The bank believes the budget will remain mildly expansionary, maintaining fiscal consolidation with a potential fiscal deficit at around 3.5% of GDP.

The government's theme, "Reaching for the Skies, While Anchored on Our Values," will focus on fiscal sustainability, inclusive growth, social protection, business climate, and energy, food security, and climate resilience. Budget 2027 will likely prioritize economic resilience and sustainable medium-term growth through advanced manufacturing, energy transition, aerospace, chemicals, and continued fiscal consolidation.

Key development spending priorities include transport connectivity, water and electricity infrastructure, flood mitigation, healthcare, education, and support for Sabah, Sarawak, and rural areas. RHB IB does not expect significant new taxes, instead emphasizing revenue optimization and fiscal consolidation. They forecast Malaysia's GDP growth at 4.9% in 2027, driven by resilient private consumption, strategic-sector capital deployment, and national initiatives.

External risks, such as US tariffs, AI investment cycle sustainability, and geopolitical tensions, remain, but Malaysia's diversified economy should provide some buffer. Inflation is expected to stay contained at 1.9% in 2027, supported by stable domestic demand, a stable ringgit, and gradual price pass-through.