Kuala Lumpur:#CT Budget 2027 is expected to sustain economic growth while maintaining fiscal discipline, with Malaysia's fiscal deficit projected to narrow to 3.3 per cent of gross domestic product (GDP) next year, according to MBSB Investment Bank Bhd (MBSB IB).
Budget 2027 is set to increase government expenditure to RM460 billion from this year’s RM444 billion, focusing on growth and fiscal consolidation.
According to BERNAMA News Agency, the fiscal deficit is projected to decrease to 3.3% in 2027, down from an estimated 3.6% in 2026, steering the country towards its medium-term deficit target of 3.0% of GDP. The government's commitment to fiscal discipline is expected to lower sovereign risk premiums and enhance the appeal of ringgit-denominated assets to investors.
The investment bank anticipates Malaysia's economy will remain strong in 2027, with a GDP growth forecast of 4.6%. Companies listed on Bursa Malaysia are projected to see earnings growth of 6.6% year-on-year. This solid economic performance and earnings growth are expected to improve equity valuations.
MBSB IB also foresees benefits for the local equity market from a potential easing of geopolitical tensions in West Asia, predicting Brent crude oil prices to reduce to between US$75 and US$85 per barrel. The investment bank has set a preliminary end-2027 target of 1,850 points for the FBM KLCI, with the FBM Emas Shariah and FBM 70 indices expected to reach 13,600 points and 20,000 points, respectively.
In the near term, MBSB IB remains optimistic about Malaysia's economic fundamentals and corporate earnings, despite recent setbacks in the local equity market influenced by net foreign selling. The bank projects that selling pressure will ease in the fourth quarter of 2026, supported by robust economic conditions and improved earnings prospects. However, it has adjusted its end-2026 target for the FBM KLCI to 1,770 points, with a potential downward shift towards 1,700 points.
Its end-2026 targets for the FBM Emas Shariah and FBM 70 indices remain at 12,900 points and 18,600 points, respectively.Business/CT#