Budget 2027 revenue measures fall short as oil prices weigh on fiscal plans
RAM Ratings expects tax reliefs to reduce collections by RM2.96 billion, while MARC says the lower deficit target represents a reduction of just RM1 billion.
RAM Rating Services Bhd and Malaysian Rating Corp Bhd (MARC) have raised concerns over Malaysia’s fiscal outlook under Budget 2027, citing limited revenue reforms and pressure from elevated energy prices. RAM Ratings said tax reliefs would likely cut government collections by RM2.96 billion.
RAM Ratings said the budget could have done more to widen the tax base. It put Malaysia’s tax-to-economy ratio at 12.8%, compared with above 14% for Thailand and the Philippines and around 15.7% for the Organisation for Economic Cooperation and Development.
On expenditure, MARC expects the 2027 bill for subsidies and social assistance to exceed the RM55.3 billion recorded in 2025. Fuel subsidies are expected to stay around RM40 billion, compared with normalised levels of around RM20 billion.
According to RAM Ratings, the government assumes Brent crude will average US$85 per barrel in 2027, matching its revised 2026 assumption. The agency cautioned that subsidy spending could become unsustainable over time without targeted measures, while MARC pointed to possible pressure from higher funding costs.
The fiscal deficit target is 3.3% of GDP for 2027, against 3.6% in 2026. MARC said this amounts to only a RM1 billion reduction, with nominal GDP growth accounting for much of the improvement in the ratio.
RAM Ratings said government debt was 63.1% of GDP at end-June 2026. It expects the ratio to reach 64% at end-2026 before easing to 63.7% at end-2027. The agency said the debt path had not improved meaningfully towards the below-60% level stipulated for 2030 under the Fiscal Responsibility Act 2023 (FRA).
