Malaysia's fiscal deficit to narrow, but spending risks persist: BMI
KUALA LUMPUR: BMI has maintained its forecast for Malaysia’s fiscal deficit to narrow to 3.4 per cent of gross domestic product (GDP) in 2027 from an estimated 3.6 per cent in 2026.
Malaysia's fiscal deficit is projected to narrow to 3.4% of gross domestic product (GDP) in 2027, down from an estimated 3.6% in 2026, according to research firm BMI. The government aims to meet its 2027 revenue target of RM380.8 billion, a 4.7% increase from the revised 2026 target of RM363.3 billion. This revenue growth is expected to be driven by a favorable economic growth backdrop.
The Ministry of Finance revised its 2026 growth projections higher to 4.8-5.3% (BMI: 5.1%), with the finance minister anticipating a moderate growth rate of 4.25-4.5% in 2027. Higher oil prices and Petroliam Nasional Bhd (Petronas) dividends are expected to bolster petroleum-related revenue, currently at 2.5% of GDP in 2026 and projected to rise to 2.6% in 2027.
However, Malaysia's reliance on petroleum-related income is expected to continue its downward trend. High subsidies and social assistance, including RM16 billion in cash aid for low-income households and an increased minimum wage to RM2,000, make up 82% of total spending. Despite an easing in spending to RM72.7 billion in 2027, the prolonged US-Iran conflict and severe El Niño conditions could drive up subsidy spending further.
The development expenditure is set to fall for the third consecutive year to RM83 billion in 2027 (3.6% of GDP), below the government's RM430 billion commitment through 2030.
Written by urgent.news from New Straits Times's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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