Malaysians could see higher cash assistance, targeted personal income tax relief and a possible increase in the minimum wage under Budget 2027, as the government seeks to cushion living costs while maintaining its fiscal consolidation programme, according to CIMB Treasury and Markets Research.
In its Budget 2027 preview, Doing More Within Limits, the research house forecasts the fiscal deficit narrowing to 3.4% of gross domestic product (GDP) in 2027 from an estimated 3.5% this year, supported by lower fuel subsidy expenditure and stronger government revenue.
The budget, scheduled to be tabled on Oct 9, is expected to balance household assistance with development spending and measures to strengthen productivity, investment and the domestic economy.
CIMB expects the government to avoid a broad fiscal stimulus package, instead directing available resources towards targeted support and initiatives that could deliver longer-term economic benefits.
The Ministry of Finance’s Pre-Budget Statement has identified cost-of-living pressures, social protection, productivity, infrastructure and governance among the priorities for Budget 2027, although specific allocations and tax changes have yet to be announced
STR And SARA Could Rise To RM17 Billion
One of CIMB’s principal expectations is an increase in combined Sumbangan Tunai Rahmah (STR) and Sumbangan Asas Rahmah (SARA) allocations to RM17 billion from RM15 billion in 2026.
The additional RM2 billion would help maintain household purchasing power amid higher living costs, particularly for lower-income groups.
CIMB expects the increase to remain focused on the RM100 SARA payment for Malaysians aged 18 and above, alongside targeted STR payments determined by income and household characteristics.
However, the research house cautioned that household spending would increasingly depend on employment and private-sector wage growth as the impact of earlier civil service salary increases moderates.
Despite the proposed increase in assistance, CIMB expects total subsidies and social assistance expenditure to decline to RM73 billion in 2027 from RM79.1 billion in 2026, principally because of lower projected fuel subsidies.
Middle-Income Taxpayers May Receive Relief
CIMB also sees scope for targeted personal income tax relief aimed at middle-income Malaysians who face rising household expenses but may receive less direct cash assistance.
Its illustrative proposal involves reducing selected personal income tax rates by one percentage point and adjusting the tax bracket above RM100,000 in chargeable income.
Under this scenario, taxpayers with RM70,000 in chargeable income could save approximately RM200 annually, while those with RM100,000 could save RM500.
The maximum saving would reach RM1,000 annually for taxpayers with chargeable income of RM150,000 and above.
CIMB estimates that a package of this scale would cost the government approximately RM800 million annually.
These are possible adjustments examined by the research house, rather than confirmed Budget 2027 measures.
Businesses could also receive further Sales and Service Tax (SST) relief, particularly on production inputs and services where taxes are embedded at multiple stages of the supply chain.
CIMB expects selected exemptions to be expanded or extended, potentially benefiting manufacturing, construction and agriculture.
It has factored approximately RM1 billion in additional SST relief into its projections while forecasting overall SST revenue to increase to RM72 billion in 2027.
A broader mechanism allowing businesses to claim credits for tax paid on eligible inputs could be considered, although CIMB believes such a system would be more likely from 2028 onwards because of the administrative requirements involved.
Minimum Wage Could Increase To RM1,800–RM2,000
Another development that workers and employers will be watching is a possible revision to the statutory minimum wage.
CIMB sees scope for the current RM1,700 minimum wage to rise to between RM1,800 and RM2,000, with RM1,800 to RM1,900 considered more consistent with a gradual adjustment.
The research house noted that businesses are already contending with higher labour, energy and logistics costs, while productivity improvements have not necessarily kept pace with wage increases.
Against this backdrop, CIMB believes a broad implementation of the multi-tier foreign worker levy may be less likely in the near term, as employers require more time to absorb existing cost pressures and invest in automation.
Lower Fuel Subsidies Key To Fiscal Consolidation
CIMB’s projections depend significantly on an easing of fuel subsidy expenditure.
The research house expects petrol and diesel subsidies to decline to RM32 billion in 2027 from RM41 billion in 2026, assuming Brent crude averages US$85 a barrel and the ringgit averages RM4.10 against the US dollar.
The RM9 billion reduction would create additional fiscal room for household assistance and development programmes without reversing the government’s deficit reduction trajectory.
However, CIMB warned that prolonged disruptions to global energy supplies could keep oil prices elevated and undermine the expected savings.
In such a scenario, the government could face pressure to retain selected operating expenditure controls or tighten subsidised fuel quotas and eligibility requirements.
Higher fuel costs without sufficient offsetting savings would place additional pressure on the fiscal deficit.
Development Spending To Rise To RM83 Billion
Beyond household support, CIMB forecasts gross development expenditure increasing to RM83 billion in 2027 from RM80 billion this year.
It expects spending priorities to include infrastructure, energy and food security, productivity improvements and investment incentives that generate stronger domestic economic benefits.
The research house said the next phase of investment policy is likely to focus more closely on realised projects, local supply-chain participation, technology transfer and the creation of higher-quality jobs.
On the revenue side, CIMB projects federal government revenue rising 3.7% to RM373 billion, supported partly by a higher PETRONAS dividend of RM25 billion, compared with RM20 billion budgeted for 2026.
It also expects approximately RM1 billion in receipts from the global minimum tax.
Further details on Malaysia’s planned carbon tax could emerge in Budget 2027, although CIMB does not expect meaningful revenue from the measure next year.
Economic Growth Seen At 4.5% In 2027
CIMB forecasts Malaysia’s economic growth moderating to 4.5% in 2027 from 5.0% in 2026, with headline inflation easing slightly to 1.8% from 1.9%.
The research house expects Budget 2027 to provide modest support for domestic demand rather than generate a major acceleration in economic activity.
It also forecasts gross Malaysian Government Securities and Government Investment Issues issuance easing to RM181 billion in 2027 from RM185 billion, reflecting lower debt maturities.
Ultimately, CIMB expects Budget 2027 to centre on a fiscal balancing exercise: providing additional relief to households and businesses while preserving resources for development and gradually reducing the deficit.
The extent to which those objectives can be achieved will depend heavily on energy prices, government revenue performance and the ability to contain expenditure without disrupting essential services or investment.
