A NATIONAL budget can ease today’s pressure, or it can help reshape tomorrow’s economy. Budget 2027 must attempt both.
With cost pressures persisting, targeted assistance is still needed to protect vulnerable households and small businesses.
But relief alone cannot resolve the deeper constraints on growth.
Budget 2027 should also focus on strengthening the institutions, capabilities, and investment environment that lay the groundwork for lasting improvements.
It is, therefore, the national priority to look beyond the typical annual budget cycle, directing available fiscal space toward the long-term drivers of real income growth, that is firm-level productivity, capital deepening, and global competitiveness.
A conduit for medium-term reform
Malaysia isn’t short of economic ambitions. Realising them, however, will depend on disciplined, multi-year budgetary execution.
Crucially, fiscal consolidation efforts under the Public Finance and Fiscal Responsibility Act 2023, notably subsidy retargeting and tax base broadening through measures such as phased e-invoicing and expanded service tax scopes, have provided a vital buffer against external shocks.
The central challenge is strategically deploying resources into high-multiplier developmental spending, digital public infrastructure, and modern public delivery to create lasting productive capacity.
Beyond disbursing public funds, a credible budget crowds in public investment, strengthens institutional capacity, and builds resilience against external shocks.
Institutional rejuvenation: Anchoring productivity and business facilitation
Sustained wage growth and stronger external competitiveness will increasingly depend on continued improvements in productivity, making it an important focus area for fiscal policy.
While statutory wage mechanisms protect entry-level earnings, sustained increases in real living standards depend fundamentally on expanding output per worker.
This needs to be accompanied by investment in meaningful reskilling initiatives in tandem with artificial intelligence advancements.
A way to advance this agenda is by strengthening institutions that facilitate productivity improvements and business growth.
To catalyse broad-based private sector expansion, two institutional platforms driven by the Malaysia Productivity Corp (MPC) could be reinforced: the Productivity Nexus model and Pemudah (the Special Task Force to Facilitate Business).
Rather than relying on standalone grants and initiatives that may be unable to sustain impact beyond individual funding cycles, scaling the public-private collaboration model embedded in the Productivity Nexuses can create an institutional mechanism that stimulates continuous capability building, technology adoption, and productivity growth to drive sustained improvements.
Under this structure, industry leaders can collaborate with administrative ministries to co-design adoption benchmarks for process digitalisation, industrial automation, and technical upskilling.
Budget 2027 can institutionalise this framework across priority sectors under the New Industrial Master Plan 2030, channelling fiscal allocations into performance-linked matching facilities overseen jointly by industry and government agencies to ensure verifiable gains in total factor productivity.
Concurrently, the operational reach of Pemudah could be strengthened to accelerate microeconomic deregulation across all levels of the government.
While it provides a collaborative forum between senior policymakers and corporate leaders, impact depends on sustained engagement and alignment across state and local government authorities.
Budget 2027 can fund the expansion of single-window digital regulatory systems as an avenue for more centralised governance and expedite inter-agency regulatory reviews.
By systematically lowering administrative compliance costs through structured public-private execution, the government directly strengthens domestic business resilience and operational efficiency.
To achieve greater impact, the MPC could be further empowered to play a stronger coordinating role in advancing productivity-enhancing reforms across ministries.
Developed economies demonstrate that sustained productivity gains require institutions with strong mandates.
For example, Singapore tightly links productivity milestones to enterprise support, while Australia’s independent Productivity Commission conducts statutory public enquiries and reviews of policy and regulatory barriers, with its reports tabled in Parliament.
Strategic investment discipline and competitive neutrality
Enhancing the allocative efficiency of public capital deployment represents a complementary fiscal imperative for Budget 2027.
In today’s geo-economic environment, investment facilitation cannot rely exclusively on statutory tax holidays and direct capital subsidies.
Fiscal incentives should systematically transition toward performance-based frameworks that incentivise domestic supply chain integration, private research and development outlays, and measurable technology adoption across the domestic economy.
Equally critical is preserving competitive neutrality across priority sectors.
Strategic coinvestments mobilised through government-linked investment companies and development agencies under the GEAR-uP programme can complement private capital by supporting domestic ecosystem development, enabling new growth opportunities, and reducing barriers to investment in strategic sectors.
Beyond mobilising investment, emphasis should also be placed on ensuring that capital is deployed in ways that enhance enterprise performance and long-term value creation.
This is reflected in the principles underlying the MY Value Up programme, which encourages public listed companies to strengthen value creation through measurable outcomes such as productivity gains, innovation, workforce development, and enhancement of domestic capabilities.
Enterprise-level value creation is underpinned by a broader ecosystem of public infrastructure and enabling institutions that support investment and innovation.
Fiscal resources are most effectively directed toward public goods, including modern grid infrastructure, shared industrial testing facilities, and technical skills development that reduce structural barriers to entry.
When government-related funds shoulder early project risks and build shared networks, private investments are encouraged to follow.
Capital outlays should remain anchored on robust governance frameworks, with incentives tied to clear outcomes and periodic reviews to ensure fiscal support translates into sustained productivity improvements and broader economic benefits.
Sustaining fiscal discipline for long-term growth
Budget 2027 comes at a time where Malaysia’s economic challenge is less about generating growth and more about sustaining higher-quality growth.
In that regard, the national budget therefore presents an opportunity to focus on the quality of expenditure, directing finite resources to strengthen the institutions, capabilities, and investment environment – helping to ensure fiscal consolidation and economic development reinforce rather than compete with one another.
Yee Ming Hwa is PwC Malaysia’s economics and policy deals director. The views expressed here are the writer’s own.
