Budget 2027: Fiscal Deficit Expected To Narrow To 3.3 Pct Of GDP - Apex Securities

KUALA LUMPUR, Oct 7 (Bernama) -- Malaysia’s fiscal deficit is expected to narrow to RM76 billion, or 3.3 per cent of gross domestic product (GDP), in 2027 from an estimated 3.5 per cent in 2026, keeping the government on track towards its medium-term target of 3.0 per cent by 2028.

In a research note today, Apex Securities Bhd said Budget 2027 is expected to remain mildly expansionary but measured, with the focus likely to remain on targeted household support, fiscal discipline and productivity-enhancing investment.

“Our in-house estimates point to revenue of RM383.3 billion in 2027, up 5.5 per cent year-on-year, while operating expenditure is expected to rise 4.6 per cent to RM378.4 billion.

“Gross development expenditure is projected at RM82.4 billion, versus RM80 billion in 2026,” it added.

The stockbroking firm said Budget 2027, the fifth MADANI Budget and second under the 13th Malaysia Plan, is expected to balance three objectives -- supporting households, strengthening Malaysia’s growth capacity, and maintaining fiscal discipline.

It said the rise in development expenditure to RM82.4 billion is constructive, but the quantum does not point to a new fiscal stimulus cycle.

“The key market question is how quickly allocations translate into tenders, awards and project execution, and this favours contractors with visible order books and strong execution capability,” it said.

For construction, Apex Securities said the key opportunity is the execution of the existing infrastructure pipeline rather than a fresh mega-project cycle, with transport, highways, water and East Malaysia connectivity already providing a multi-year runway.

On household support, the stockbroking firm expected the combined Sumbangan Tunai Rahmah and Sumbangan Asas Rahmah allocation to increase to around RM17 billion from RM15 billion in 2026.

“This should provide a direct buffer for lower- and middle-income households and support mass-market consumption.

“However, the scale of support will be constrained by the higher fiscal burden from energy subsidies,” it said.

Apex Securities said weaker consumer confidence, elevated living costs and potential wage and subsidy changes should keep discretionary spending selective.

Meanwhile, on tax policy, it did not expect major new broad-based taxes, with the key areas to watch being the incorporation of selected goods and services tax features into the sales and service tax (SST) framework, broader SST exemptions, wider e-invoice adoption and greater clarity on the carbon-tax timetable.

Artificial intelligence, semiconductors and data centre infrastructure would remain the strongest structural-growth themes, and Budget 2027 should reinforce an investment cycle already underway rather than initiate it, the stockbroking firm said.

“The data centre boom is increasing the importance of grid capacity, transmission, firm renewable power and storage.

“We will focus on whether Budget 2027 extends green investment tax allowance/green income tax exemption to storage, continues rooftop-solar support, clarifies the automatic fuel adjustment mechanism and provides a path for energy-transition investment,” it said, adding that a standalone storage incentive would be a clear upside surprise.

Apex Securities said Budget 2027 should be mildly positive for the FTSE Bursa Malaysia KLCI (FBM KLCI), but it did not expect a broad-based re-rating for the benchmark index.

“Fiscal consolidation remains the policy anchor, while the expected increase in development expenditure is modest.

“The earnings impact should therefore be concentrated in selected sectors, and we maintain our end-2026 FBM KLCI target of 1,770,” it said.

-- BERNAMA