Malaysia’s continued economic resilience, fiscal consolidation efforts and the need for structural reforms took centre stage at Malaysian Rating Corporation Berhad’s (MARC) post-Budget webinar, MARC360: Decoding Budget 2027 – The Economy and What Comes Next, held today in collaboration with Moody’s Ratings.
The webinar examined Malaysia’s economic prospects following Budget 2027, focusing on the balance between sustaining growth and strengthening fiscal sustainability. Discussions centred on the country’s fiscal priorities, revenue mobilisation, tax reforms, sovereign credit resilience and opportunities to support longer-term economic growth.
In his welcome remarks, MARC Group Chief Executive Officer Arshad Mohamed Ismail emphasised that the success of Budget 2027 should be measured not merely by the size of its allocations, but by their effectiveness in strengthening Malaysia’s economic foundations and improving living standards.
“Malaysia’s economy enters this period with encouraging momentum, supported by resilient domestic demand, investment activity and the ongoing global technology upcycle. While the country has made progress in fiscal consolidation, the challenge now is to sustain this momentum while preserving sufficient fiscal space to support growth and respond to future shocks. We must continue to drive productivity and innovation, accelerate the energy transition, strengthen food and energy security, embrace digitalisation and artificial intelligence, and develop highly skilled talent. The challenge is not simply to spend more, but to spend effectively and generate measurable outcomes. Ultimately, the success of Budget 2027 should not be judged solely by the size of its allocations. What matters is what those allocations achieve,” said Arshad.
He also highlighted Malaysia’s underlying credit strengths, noting that MARC Ratings maintains the country’s sovereign rating at AAA with a Stable outlook based on its national rating scale. Nevertheless, elevated public debt and fiscal deficits relative to peers underscore the importance of continued fiscal consolidation, improved spending efficiency and disciplined policy implementation.
The webinar proceeded with a presentation titled Budget 2027 in Context: Malaysia’s Macroeconomic Outlook and Ratings Landscape by Kamal Zharif Jauhari, Senior Economist at MARC Ratings Berhad.
Commenting on Malaysia’s fiscal and economic outlook, Kamal said, “Budget 2027 reflects Malaysia’s continued commitment to fiscal consolidation while maintaining support for economic growth amid a challenging global environment. The fiscal deficit is targeted to narrow further to 3.3% of GDP in 2027, although the absolute deficit is projected to decline only marginally from RM78.5 billion to RM77.5 billion. With revenue expected to moderate to 16.4% of GDP and committed expenditure remaining elevated, fiscal flexibility remains constrained. Nevertheless, the RM83 billion development allocation provides continued support for investment and economic activity. Malaysia’s economy has demonstrated resilience, expanding by 5.7% in the first half of 2026, supported by domestic demand, investment activity and the global technology upcycle. MARC Ratings forecasts real GDP growth of 5.1% in 2026 and 5.0% in 2027, underpinned by sustained domestic demand and investment momentum.”
The presentation was followed by a panel discussion titled Beyond the Numbers: Assessing the Impact of Budget 2027, moderated by Deborah Tan, Vice President, Credit Strategy and Guidance Group, Moody’s Ratings. The discussion featured Rozita Abd Matalib, Deputy Undersecretary, Macroeconomics Sector, Fiscal and Economics Division, Ministry of Finance Malaysia; Dr Veerinderjeet Singh, Senior Adviser on Tax Policy, KPMG Malaysia; and Dr Ray Choy, Chief Economist, MARC Ratings Berhad.
Representing the Ministry of Finance Malaysia, Rozita Abd Matalib emphasised the importance of strengthening Malaysia’s domestic capabilities to maximise the economic benefits of investments in high-growth sectors, particularly semiconductors, data centres and digital infrastructure. She highlighted Budget 2027’s focus on empowering local companies and start-ups, alongside investments in infrastructure and talent development to support higher-value economic activities. Beyond attracting investments, she stressed the need to generate meaningful economic spillovers through stronger linkages with domestic businesses, technological advancement and sustainable resource management. These efforts would be essential to increasing domestic value added, creating high-skilled employment, raising incomes and supporting Malaysia’s net-zero ambitions and long-term economic resilience.
On strengthening Malaysia’s revenue base, Dr Veerinderjeet Singh highlighted that the country’s relatively narrow tax base is largely attributable to low average wages, which place many workers below the personal income tax threshold, as well as corporate tax incentives that reduce taxable profits. He underscored the need for a comprehensive approach to revenue mobilisation, including raising wages alongside productivity improvements, reviewing corporate tax incentives to ensure measurable economic benefits and strengthening tax administration to minimise revenue leakages, particularly in Sales and Service Tax (SST) collection.
Meanwhile, Dr Ray Choy, Chief Economist of MARC Ratings Berhad, emphasised the importance of diversifying Malaysia’s sources of economic growth while strengthening fiscal resilience.
“While Malaysia’s economic fundamentals remain resilient, sustaining long-term growth requires greater diversification beyond the current technology and data centre investment cycle. Opportunities in agriculture, mining, oil and gas, rare earth resources and the development of less developed states could help broaden the country’s economic base.
“At the same time, fiscal sustainability remains critical. With operating expenditure accounting for 81.9% of total expenditure and debt servicing absorbing approximately 16% of government revenue, structural revenue reforms, greater expenditure efficiency and a broader tax base are essential. Strengthening fiscal buffers will also help preserve fiscal space for investments in education, healthcare and infrastructure, while safeguarding the economy against future external shocks,” said Dr Ray.
Through its MARC360 platform, MARC continues to provide a forum for discussions on key economic and financial developments, offering perspectives on emerging trends, challenges and opportunities shaping Malaysia’s economy and capital markets.