Fitch Solutions unit BMI maintained its forecast that Malaysia’s fiscal deficit will narrow to 3.4% of GDP in 2027 from 3.6% in 2026, projecting the government will hit its RM380.8 billion revenue target on resilient growth, rising SST collections (now 18% of total revenue, up from 7.5% in 2009) and higher Petronas dividends (RM32 billion, up from RM27 billion). This matters for the spending side too: operating expenditure stays elevated at 82% of total spending due to higher subsidies and social assistance (RM74.5 billion, 3.2% of GDP), while development expenditure falls for a third straight year to RM83 billion, below the government’s own RM430 billion-through-2030 commitment pace, something BMI flagged as a longer-term risk to productivity and innovation goals. Investors tracking sovereign credit signals, businesses dependent on subsidy levels, and sectors relying on development spending may be affected, with BMI noting a prolonged US-Iran conflict or severe El Niño could still push subsidy spending higher than planned.

 

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