KUALA LUMPUR: Malaysia's strong economic performance must translate into tangible improvements in living standards as the government balances economic growth with fiscal consolidation under the 2027 Budget.
Treasury secretary-general Tan Sri Johan Mahmood Merican said Malaysia had recorded encouraging economic growth, but the gains had yet to fully translate into public satisfaction with the economy.
"The budget remains anchored on the Ekonomi Madani framework, with greater emphasis on an inclusive approach to ensure that the needs of various segments of society including the B40, M40 and T20 groups, as well as the young and elderly continue to be addressed," he said
at a post-budget discussion,
Malaysia's economy grew 5.2 per cent in 2025, while the government has projected growth of between 4.8 and 5.3 per cent this year, before moderating to between 4.2 and 5.2 per cent in 2027.
Johan Mahmood said addressing the cost of living remained a priority, noting that household incomes had not increased in line with rising living costs despite inflation remaining under control.
"In a context where inflation in Malaysia is under control, one of the sources of the cost-of-living challenge is that income levels have not increased in line with the rising cost of living," he said.
He added that increasing incomes was therefore important, with the minimum wage serving as one of the measures to address the issue, although it would not resolve the challenge on its own.
The minimum wage is set to increase from RM1,700 to RM2,000 in June next year, with the government giving larger companies time to adjust their wage structures before extending the implementation to micro, small and medium enterprises (MSMEs).
"The hope is that these large companies will also look at their overall salary structures and make adjustments based on the increase in the minimum wage," he said.
Johan Mahmood said the government had also set a living-wage benchmark of RM3,400 for government-linked companies (GLCs), which could serve as a reference for private-sector employers in determining salaries.
He added that the government wanted employers to consider wages across different employee groups.
This includes starting salaries for graduates and diploma holders, rather than focusing solely on the lowest-paid workers.
On concerns about the impact of higher minimum wages on businesses, Johan said the RM2,000 rate had been presented to and approved by the National Wages Consultative Council, which includes representatives from both employers and workers.
He said the rate itself had not been disputed in the council's deliberations, while the Cabinet had considered allowing MSMEs more time to implement the increase.
"We are starting with large companies first because we also understand that MSMEs are among those affected by the conflict in Middle East and may need more time to adjust their business models," he said.
On fiscal policy, Johan Mahmood said the government would continue reducing its deficit gradually while maintaining sufficient spending to support economic activity amid global uncertainty.
He said maintaining investor confidence through disciplined and prudent financial management remained a priority as the government pursued its fiscal consolidation targets.
"One key priority is to maintain investor confidence by demonstrating that Malaysia can implement disciplined and prudent financial management," he said.
Johan Mahmood said the fiscal deficit narrowed to 3.7 per cent of gross domestic product (GDP) in 2025, with the government projecting 3.6 per cent this year, slightly above its original target of 3.5 per cent.
The government aims to reduce the deficit to 3.3 per cent in 2027 and three per cent by 2028 under the Fiscal Responsibility Act.
He said the national debt ratio was projected to decline from 65.2 per cent in 2025 to about 64 per cent this year and 63.7 per cent in 2027.
However, he noted that the government had factored in the possibility of oil prices remaining elevated amid uncertainty in the Middle East.
Petroleum product subsidies are estimated at about RM40 billion this year, with the government projecting a similar amount for 2027.
He said the government would adjust its approach if oil prices exceeded expectations, as it had done this year.
"If oil prices are higher than expected, we will make adjustments according to the circumstances," he said.
Johan Mahmood said the 2027 Budget allocates RM459.8 billion for operating and development expenditure, up from RM419.2 billion under the 2026 Budget.
Including investments by GLCs, statutory bodies and public-private partnerships, the total would reach about RM510 billion, up from RM470 billion.
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