Malaysia's wage growth to be supported by labour market reforms in 2027

Wage growth in Malaysia is expected to remain stable in 2027, according to the Finance Ministry's Economic Outlook report. This steady growth will be supported by labour market reforms, productivity-linked pay frameworks, and efforts to match workers' skills with industry demand. The review of the GEAR-uP living wage framework is also anticipated to encourage more private sector employers to offer higher wages.

Gross operating surplus, which accounts for 62.1% of Malaysia's GDP in 2027, is projected to grow by 5.2%. This growth will drive business income, stimulated by strategic integration along the global value chain, resilient domestic demand, and robust digital infrastructure investment. Artificial intelligence is expected to create a surge in demand for electrical and electronic goods.

However, corporate profit margins in export-oriented sectors could face challenges from higher domestic input costs, uncertain global trade conditions, and geopolitical tensions in the Middle East. Overall, mixed income is projected to grow by 8.4%, accounting for 16.3% of GDP. Income from taxes less subsidies is expected to increase by 16.5%, thanks to enhanced tax compliance and enforcement efforts.

The labour market is also expected to remain stable, with strong domestic demand and continued structural reforms. The unemployment rate is projected to stay low at 3%, while total employment is expected to grow by 2% to 17.2 million people. The services and manufacturing sectors are expected to make up more than 80% of employment opportunities.

The number of low-skilled foreign workers is anticipated to decline further in 2027, while expatriate employment is projected to increase modestly due to demand for specialised talent in high-growth, high-value sectors.

Labour productivity is expected to rise by 3.7% to RM112,098 in 2027, driven by sustained productivity growth in the services sector.