Accra:BMI has maintained its forecast for Malaysia's fiscal deficit to narrow to 3.4 percent of GDP in 2027, down from an estimated 3.6 percent in 2026.

According to BERNAMA News Agency, the Fitch Solutions unit expects the government to achieve its 2027 revenue target of RM380.8 billion, representing a 4.7 percent year-on-year increase from the revised 2026 target of RM363.3 billion. This revenue growth is anticipated to benefit from a favorable economic environment, with the Ministry of Finance adjusting its 2026 growth projections upwards to between 4.8 and 5.3 percent.

BMI noted that resilient economic activity is likely to enhance sales and service tax collections, which have grown significantly over the years. Additionally, Malaysia's position as a net energy exporter is expected to benefit from higher oil prices, boosting petroleum-related revenue. Dividends from Petroliam Nasional Bhd (Petronas) are projected to rise to RM32 billion in 2027 from an estimated RM27 billion in 2026.

Despite these positive revenue projections, operating expenditure is expected to remain high, largely due to increased subsidies and social assistance programs, including cash assistance for low-income households and an increase in the minimum wage. While spending is anticipated to decrease slightly by 2027, geopolitical tensions such as the US-Iran conflict could drive subsidy spending higher.

Development expenditure is expected to decline for the third consecutive year, potentially impacting Malaysia's long-term productivity and innovation. Additionally, severe El Niño conditions could necessitate further subsidies for the agricultural sector.

Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim has tabled Budget 2027, totaling RM459.8 billion in expenditure, marking a 3.6 percent increase from Budget 2026. The government aims for a fiscal deficit of 3.3 percent of GDP in 2027, indicating a gradual consolidation process.