Budget 2027 Balances Rakyat’s Needs With Fiscal Discipline - Economist
KUALA LUMPUR, Oct 12 (Bernama) -- Budget 2027 balances addressing the rakyat’s needs with fiscal discipline, but structural reforms are still needed to strengthen Malaysia’s long-term fiscal position, said economists.
Former deputy Investment, Trade and Industry minister and Taylor's University adjunct professor Ong Kian Ming described the newly announced budget as a "clever" budget in the sense that the Finance Minister and Prime Minister Datuk Seri Anwar Ibrahim fulfilled a variety of objectives.
"People were expecting it to be an election budget, meaning there were different handouts and also people can say goodies that were given to announce and are going to be given to the Malaysian rakyat next year.
"At the same time, because of good gross domestic product (GDP) growth numbers, the Ministry of Finance managed to reduce the overall fiscal deficit to 3.3 per cent in 2027, projected 3.6 per cent in 2026," he said during OCBC’s discussion on the implications of Budget 2027 regarding policy, politics, and the market.
However, Ong said he would have liked to see more progress on fiscal reforms, particularly regarding the tax system and fuel subsidies.
He said higher oil prices could put pressure on government finances, particularly if fuel subsidy expenditure exceeded the projected RM40 billion, while higher financing costs and infrastructure-related liabilities could further weigh on the government's fiscal position.
"Other things to look out for would be the beginning of repayment of the cost of the East Coast Rail Link (ECRL), which is going to start next year, that may add some cost," he said.
On investment, Ong said Malaysia could continue attracting foreign direct investment (FDI), particularly if the government provided greater clarity on investment policies and initiatives.
He cited the Johor-Singapore Special Economic Zone (JS-SEZ) as an example of an initiative where greater clarity could encourage further investment.
"For example, it was mentioned in the budget that the details of the JS-SEZ will be announced by the two prime ministers of Malaysia and Singapore when they meet in December.
"Having greater clarity on that will also convince FDI inflows to come into Johor and also to Malaysia as a whole," he said.
Ong said the government should also ensure that investments generate stronger benefits for local businesses and workers.
He said the Malaysian Investment Development Authority's (MIDA) new incentive framework, introduced in March this year, uses a scorecard approach that considers localisation, including local job creation and investment, to encourage foreign investors to increase their participation in the domestic economy and strengthen local supply chains.
On data centres, Ong said the government and private sector needed to ensure that investments generated more domestic economic value.
Senior ASEAN and India economist at OCBC Bank Lavanya Venkateswaran said the budget relied largely on the benefits of previous reforms to support investment.
"As far as FDI goes, specifically for this budget, the reliance is on past reforms. The fruits that past reforms have been bearing, and in the semiconductor sector with the adoption of artificial intelligence and so on," she said.
Lavanya said the budget was largely focused on households and cost-of-living measures, with relatively limited new incentives for larger corporations.
-- BERNAMA