Accra:According to BERNAMA News Agency, Budget 2027's personal income tax relief measures are set to offer annual tax savings of up to RM1,600 for around five million taxpayers. This initiative is expected to bolster middle-income consumption. CIMB Securities Sdn Bhd highlighted that the budget exceeded expectations by increasing the basic individual tax relief from RM9,000 to RM12,000 and reducing tax rates by one percentage point for income between RM70,001 and RM150,000.
Businesses will also see benefits, particularly micro, small, and medium enterprises (MSMEs), due to lower corporate tax rates and an expanded sales tax recovery on eligible machinery and production inputs. Manufacturers are set to reclaim sales tax on machinery, spare parts, and equipment purchased from local suppliers. This includes raw materials used in producing pharmaceuticals, animal feed, fertilizers, and pesticides.
CIMB Securities noted that Budget 2027 aims to support household incomes and investments while maintaining fiscal discipline, despite potential margin risks from higher wages in labor-intensive sectors. The government's fiscal deficit target for 2027 is 3.3% of GDP, slightly better than the previous forecast of 3.4%, even with an upward revision for 2026's deficit to 3.6%.
The budget is expected to positively impact the consumer sector over the long term through targeted cash assistance, tax reliefs, and other measures aimed at reducing living costs and boosting disposable income. Incremental spending is likely to benefit essentials, affordable food and beverages, and value-focused retail, notably for retailers like 99 Speed Mart, Eco-Shop, AEON, and MR D.I.Y. Consumer staples producers such as Nestlé Malaysia, QL Resources, and Life Water will also see spillover benefits.
The minimum monthly wage will rise by 17.6% to RM2,000 from June 2027, benefiting over four million workers, although MSMEs with annual sales below RM50 million are exempted. This wage increase could raise labor costs for retailers and food and beverage operators, especially those with labor-intensive operations. However, higher wages are anticipated to support household purchasing power and consumption in the long term.
Additionally, higher minimum wages are expected to increase costs for labor-intensive plantation, glove, and other manufacturing and service companies. Companies that enhance labor productivity through efficiency and automation could offset rising labor costs. The RM83 billion development expenditure allocation and ongoing infrastructure investments are expected to favor construction players, while housing incentives and connectivity improvements in Johor will benefit property companies. Renewable energy and technology firms should gain from extended green investment incentives and semiconductor funding.
CIMB Securities views Budget 2027 as neutral to mildly positive for Malaysian equities and anticipates that the minimum wage increase will have a limited direct impact on aggregate FTSE Bursa Malaysia KLCI earnings in 2027.