OCBC Bank (Malaysia) Bhd sees Budget 2027 supporting investment in high-value industries and small and medium enterprises (SMEs), although its senior ASEAN economist cautioned that rising spending pressures could make the government’s fiscal deficit target difficult to achieve.
OCBC Malaysia chief executive officer Tan Chor Sen said the budget’s focus on semiconductors, advanced manufacturing, the digital economy and new energy could strengthen Malaysia’s competitiveness and help local companies move into higher-value supply chains.
He highlighted the RM25 billion in domestic investments to be mobilised by government-linked investment companies (GLICs) under GEAR-uP, alongside enhancements to the Global Services Hub incentive to attract foreign investment.
Tan also welcomed measures to support SMEs, including lower tax rates, incentives for technology and productivity investments, and expanded financing through the Small Debt Resolution Scheme (SJPP) and Credit Guarantee Corporation Malaysia (CGC).
He said RM60 million allocated to the Malaysia External Trade Development Corporation (MATRADE), RM1 billion in Bank Pembangunan Malaysia Bhd financing for export-oriented SMEs and the MyASEAN Business Entity (MyABE) initiative would help local businesses expand into regional and international markets.
Separately, OCBC senior ASEAN economist Lavanya Venkateswaran said the government’s fiscal deficit projections were broadly in line with expectations, with the deficit expected to narrow to 3.3% of gross domestic product (GDP) in 2027 from 3.6% in 2026.
However, she warned that achieving the target remained uncertain amid external volatility, domestic political pressures and persistent expenditure demands, particularly subsidies.
Venkateswaran said revenue measures appeared to rely more heavily on commodities rather than broadening the revenue base, with higher Petronas dividends expected to help offset revenue losses from income tax adjustments. Petronas dividends are projected at RM27 billion in 2026 and RM32 billion in 2027.
She added that elevated oil prices and other operational spending needs could limit the scope for fiscal consolidation, maintaining OCBC’s forecast of a fiscal slippage of 0.2% to 0.3% of GDP in 2027.
The economist also noted that Budget 2027 included higher cash assistance and subsidies, middle-income tax relief and an increase in the minimum wage to RM2,000 from RM1,700, reflecting the government’s efforts to address cost-of-living pressures.
