Budget 2027 To Support Growth, Reduce Fiscal Deficit To 3.3 Pct - MBSB IB
KUALA LUMPUR, Oct 10 (Bernama) -- Budget 2027 is expected to sustain economic growth while maintaining fiscal discipline, with Malaysia’s fiscal deficit projected to narrow to 3.3 per cent of gross domestic product (GDP) next year, according to MBSB Investment Bank Bhd (MBSB IB).
The investment bank said total government expenditure is expected to increase to RM460 billion in 2027 from the revised estimate of RM444 billion this year, while improved revenue collection and continued economic growth are expected to support further fiscal consolidation.
The projected fiscal deficit of 3.3 per cent next year would be lower than the estimated 3.6 per cent in 2026 and keep the country on track to achieve its medium-term deficit target of 3.0 per cent of GDP.
"The government’s commitment to fiscal discipline and an improved outlook will help lower sovereign risk premiums and boost the valuation of ringgit-denominated risk assets.
"Consequently, this will heighten their attractiveness to both local and foreign investors," it said in a note today in reaction to Budget 2027, themed "Reaching to the Sky, Rooted in the Earth", which was announced by Prime Minister and also Finance Minister Datuk Seri Anwar Ibrahim yesterday.
Going into 2027, the investment bank expects Malaysia’s economy to remain resilient, with its preliminary GDP growth forecast at 4.6 per cent.
It said market consensus also projected healthy earnings growth of 6.6 per cent year-on-year for companies listed on Bursa Malaysia next year.
"Underpinned by baseline expectations of resilient macroeconomic performance and healthy earnings growth in 2027, equity valuations are expected to improve," it said.
MBSB IB also expects the local equity market to benefit from an anticipated easing of geopolitical tensions in West Asia, with Brent crude oil prices projected to decline toward the US$75 to US$85 per barrel range.
As such, the investment bank reiterated its preliminary baseline end-2027 target of 1,850 points for the FBM KLCI, while its preliminary end-2027 targets for the FBM Emas Shariah and FBM 70 indices stand at 13,600 points and 20,000 points, respectively.
On the near-term outlook, MBSB IB said it remained positive on Malaysia’s domestic economic fundamentals and corporate earnings prospects despite the recent weakness in the local equity market, which was largely driven by persistent net foreign selling.
It expects the selling pressure to reverse later in the fourth quarter of 2026, supported by resilient domestic economic conditions and improving corporate earnings prospects.
However, the investment bank revised its assessment of the FBM KLCI’s end-2026 target of 1,770 points, with a downward bias towards the psychological 1,700-point level.
Its end-2026 targets for the FBM Emas Shariah and FBM 70 indices remain at 12,900 points and 18,600 points, respectively.
-- BERNAMA