KUALA LUMPUR: Higher wages under Budget 2027 will require productivity gains, business investment and technology adoption to sustain competitiveness and create better jobs, according to CIMB Treasury and Markets Research.
In a note today, CIMB said that, beyond statutory wage increases, reviewing wider pay structures and offering competitive remuneration and career opportunities would be important to attract and retain skilled talent as businesses moved into higher-value activities.
“Sustaining wage growth, however, will depend on corresponding improvements in productivity through investment in skills, equipment and business processes,” it said.
READ MORE: Clear guidelines required for MSME minimum wage exemption – MEF
The minimum wage increase comes with an exemption for micro, small and medium enterprises (MSMEs) with annual sales below RM50 million, while government-linked investment companies (GLICs) and government-linked companies (GLCs) have committed to raising their living wage benchmark from RM3,100 to RM3,400 per month.
CIMB said employee compensation accounts for about 34 per cent of gross domestic product (GDP), making higher incomes central to ensuring workers benefit more fully from economic growth.
It said Budget 2027 also supports productivity and business competitiveness through RM57 billion in loan facilities and financing guarantees, extended accelerated capital allowances for information and communications technology equipment and software, and measures to encourage digitalisation and the adoption of artificial intelligence.
On fiscal management, the note said the government remained committed to narrowing the fiscal deficit from 3.6 per cent of GDP in 2026 to 3.3 per cent in 2027 and 3.0 per cent by 2028, while retaining the flexibility to respond to significant economic shocks.
“Revenue diversification remains a priority, with the recent increase in reliance on petroleum-related revenue viewed as temporary against a longer-term decline. Sales and service tax (SST) expansion forms part of efforts to broaden the revenue base and reduce reliance on petroleum.
“Further subsidy targeting will need to balance fiscal sustainability with household incomes and cost-of-living pressures,” it said.
The report also highlighted governance reforms, including the Government Procurement Act, scheduled to come into force in 2027, and plans to draft the Government-Owned Entities Bill to strengthen transparency and accountability in public spending.