Bigger Budget 2027 does not guarantee stronger growth, analyst warns
PETALING JAYA: The government should measure Budget 2027 by whether it delivers better jobs, more productive businesses and stronger domestic industries rather than by the size of its allocations, said senior analyst Ng Sze Fung.
Ng, from independent, non-profit public policy research institute Bait Al Amanah, said additional spending should strengthen productive capacity, improve public services and generate lasting economic returns.
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“A bigger budget is not necessarily a better budget. What matters is whether every additional ringgit is stretched to produce better economic opportunities for Malaysians and positive spillover effects for the economy.”
The RM510 billion spending and investment envelope is up 8.5% from RM470 billion in 2026.
Ng said with growth forecast to moderate from 4.8%–5.3% in 2026 to 4.2%–5.2% in 2027, continued public spending could help sustain domestic economic activity, but a larger budget does not by itself guarantee stronger growth.
He also said the fiscal deficit is projected to narrow from 3.6% of GDP in 2026 to 3.3% in 2027, but operating expenditure of RM376.8 billion, alongside debt servicing and other recurring commitments, would limit fiscal flexibility.
He added that the government needs to strengthen revenue collection, improve spending efficiency and continue reforming subsidies and procurement without undermining essential services or long-term investment.
Ng said the increase in financing facilities and loan guarantees from RM50 billion to RM57 billion should be accompanied by practical support to help SMEs become more productive.
He said access to financing alone would not necessarily improve productivity, adding that SMEs also need help adopting technology, developing workers’ skills and reaching larger markets. He proposed linking financing programmes with technical assistance, workforce development and stronger industry ties.
“Their effectiveness should be measured by improvements in business productivity, market expansion and the creation of better-paying jobs rather than financing disbursement alone.”
Ng also called for the one-percentage-point cut in income tax rates for eligible SMEs and MSMEs to be complemented by incentives that encourage productive investment.
He proposed that the government review existing tax incentives and strengthen compliance to ensure revenue forgone delivers meaningful economic returns.
“The real question is not whether businesses pay slightly less tax but whether the tax system encourages them to invest, become more productive and create better jobs.”
Under the GEAR-uP programme, government-linked investment companies will mobilise RM25 billion in investments.
Ng said the funds should help domestic companies commercialise technology, expand operations and compete internationally, while remaining commercially sustainable and generating appropriate risk-adjusted returns.
He said the investments should also be assessed by whether they develop technology, strengthen domestic supply chains and create high-skilled jobs.
He called for a time-bound transition for MSMEs with annual sales below RM50 million that are exempt from the minimum wage increase to RM2,000 from June 2027.
Ng said income classifications alone might not reflect differences in household needs, including living costs, access to public transport and family responsibilities.
He said subsidies remain necessary to cushion immediate cost-of-living pressures but better wages, affordable transport and reliable public services are equally important to make living costs more manageable over the longer term.