Finance ministry: Malaysia’s fiscal deficit to narrow to 3.3 pc in 2027

The Malaysian Finance Ministry has announced that the country's fiscal deficit is expected to narrow to 3.3% of gross domestic product (GDP) by 2027, as part of the medium-term consolidation efforts under the Public Finance and Fiscal Responsibility Act 2023. The ministry's Fiscal Outlook and Federal Government Revenue Estimates 2027 reveals that the pace and quality of consolidation will be adapted to the current economic conditions, with fiscal adjustments anchored by sustainable revenue improvements and expenditure efficiency.

This will help maintain a sustainable financing profile, reinforcing the medium-term debt trajectory. The ministry also highlighted that greater private sector participation through public-private partnerships and co-investment arrangements will complement public financing for infrastructure and facilitate investment in high-growth sectors.

Furthermore, the government is expected to receive a significant fiscal buffer from Petroliam Nasional Bhd's dividend, which is now projected to be RM27 billion instead of the initially estimated RM20 billion. This will help accommodate additional expenditure pressures. The ministry expects federal government revenue to increase by 6% to RM363.6 billion in 2026, up from the earlier estimate.

The escalation of the West Asia conflict and prolonged supply disruptions have impacted global trade and the economy, affecting the cost of living and fiscal resources. The government has taken swift action to safeguard energy and essential goods supply, manage cost pressures, and strengthen economic resilience through targeted fuel subsidies, temporary fuel quota adjustments, and various financing support measures for MSMEs.

The ministry emphasized its commitment to maintaining fiscal discipline and ensuring the medium-term consolidation path remains on track, despite the challenging global fiscal environment and elevated crude oil prices.