KUALA LUMPUR: The 2027 Budget is expected to provide an additional boost of up to 0.4 percentage points to gross domestic product growth next year, said RAM Ratings.
This will be driven by higher minimum wages, expanded tax reliefs and larger cash assistance.
RAM viewed the budget as expansionary while maintaining the government's fiscal consolidation path amid heightened external uncertainty and geopolitical risks.
Household support measures will total about RM80 billion, including continued fuel subsidies, increased cash handouts, higher government pensions and broader individual income tax reliefs.
The measures are expected to lift disposable income and sustain domestic consumption.
Minimum wage increases are estimated to contribute about 0.18 percentage points to GDP growth, while personal income tax reliefs and rate reductions could add up to 0.15 percentage points.
Larger cash transfers and assistance are expected to contribute another 0.07 percentage points, RAM said.
The government forecasts GDP growth of between 4.2 per cent and 5.2 per cent in 2027, slightly above the 4.0 per cent to 5.0 per cent range expected by analysts.
Government revenue is projected to rise 4.7 per cent to RM380.8 billion, supported by stronger tax collections and higher dividends from Petronas and Bank Negara Malaysia.
Tax revenue is expected to account for 78 per cent of total revenue, with sales and service tax collections rising as the tax base broadens and e-Invoice implementation improves compliance.
However, tax reliefs and lower income tax rates could reduce direct tax revenue by about RM2.96 billion.
Operating expenditure is budgeted at RM376.8 billion, while development expenditure will rise 2.5 per cent to RM83 billion.
Spending will support roads in Sabah and Sarawak, rural infrastructure and water projects.
The fiscal deficit is expected to narrow to 3.3 per cent of GDP in 2027 from an estimated 3.6 per cent this year.
Government debt, however, is projected to remain high at 63.7 per cent of GDP, above the 60 per cent limit under the Public Finance and Fiscal Responsibility Act.
Fuel subsidies will remain a major commitment at about RM40 billion, contributing to total subsidies and social assistance spending of RM72.7 billion.
RAM cautioned that broad-based subsidies could constrain fiscal consolidation unless better targeted.
Micro, small and medium enterprises will receive support through a one percentage-point tax rate reduction, expanded financing and guarantees, and incentives for digitalisation and productivity improvements.
The national minimum wage will rise by RM300 to RM2,000, while graduates and semi-skilled workers could receive a minimum wage of RM2,500.
The move may raise business costs but could encourage investment in skills, technology and productivity.
RAM said further subsidy targeting, revenue reforms and productivity gains would be essential to strengthen Malaysia's fiscal resilience and sustain growth.
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