PETALING JAYA: The Malaysian economy continues to showcase fundamental underlying strengths from a credit standpoint, says Malaysian Rating Corp Bhd (MARC Ratings) group chief executive officer Arshad Mohamed Ismail following the recently tabled Budget 2027.
MARC Ratings currently maintains Malaysia’s sovereign rating at AAA with a “stable” outlook, based on the credit rating agency’s national rating scale.
“Our assessment reflects Malaysia’s key credit strengths, including an open and increasingly diversified economy, sound monetary policy, a resilient financial sector, a strong external position, and continued progress in structural and institutional reforms,” he said at the MARC360: Decoding Budget 2027 webinar yesterday.
MARC Ratings’ gross domestic product (GDP) growth forecast stands at 5% for 2027, while its 2026 projection remains at 5.1%, Kamal Zharif Jauhari, senior economist at MARC Ratings shared.
In its Economic Outlook 2027 report, the Finance Ministry (MoF) raised its 2026 real GDP growth projections to 4.8% to 5.3%, up from 4% to 4.5% in Budget 2026, and expects growth of 4.2% to 5.2% in 2027.
Budget 2027 seeks to balance continued fiscal consolidation with domestic household spending and investment.
“Investments, as well as exports, particularly in the semiconductor realm, will continue to support the economy,” Kamal Zharif said.
He added that Malaysia’s electrical and electronics (E&E) sector has further “room to grow” amid the global technology upcycle.
“Global semiconductor sales are hitting more than 125% year-on-year whereas Malaysia’s E&E exports are between 25% to 75%, and our exports have been growing around the 30% to 50% range.”
Additionally, Malaysia’s liquefied natural gas exports have also risen as a result of the Middle East conflict, he said.
“With the supply crunch, we now see this turnaround towards looking for sources outside of the Middle East, and Malaysia stands to benefit from that.”
The MoF aims to narrow the fiscal deficit from 2025’s 3.7% of GDP to 3.6% in 2026, to 3.3% in 2027, and towards 3% by 2028.
However, Kamal Zharif noted that the deficit target of 3.3% in 2027, in absolute terms, is projected to be a marginal fall of only RM1bil, as revenue declines relative to GDP.
Malaysia’s economic growth momentum supports its targeted fiscal path in 2026, with GDP growing by 5.7% in the first half of financial year 2026 (1H26) and approved investments rising 11.7% y-o-y to RM218.5bil in 1H26, he said.
Additionally, gross exports surged 31.2% to RM1.4 trillion in the first eight months of 2026.
Higher revenue offset most of the subsidy and social assistance, which overran during the year, limiting the deficit at 3.6% of GDP, he added. MARC Ratings said in a release that medium-term outcomes for the country will increasingly hinge on revenue mobilisation, subsidy rationalisation, and productivity improvements from public investment.
Moody’s Ratings’ vice-president, credit strategy and guidance group, Deborah Tan, said that despite the global credit rating agency’s negative outlook for Asia Pacific sovereigns overall, driven by the energy shock from the Middle East conflict pushing inflation and weighing on growth prospects, economies which lean on artificial intelligence-related exports have remained resilient.
“Malaysia sits on the right side of the divide,” she said. “In July this year, we raised our 2026 growth forecast for Malaysia to around 5% for this year.”
Tan added that the economy is supported by strong electronics and data centre demand, as well as resilient domestic spending, while the ringgit has remained fairly stable and the nation’s reserve buffers have been at very high levels relative to the past decade.
On risks for Malaysia, she said the prolonging of the energy shock would have an impact on subsidies and borrowing costs.
