KUALA LUMPUR, Sept 10 — RHB Investment Bank Bhd (RHB IB) estimates that the total federal government allocation for Budget 2027 will be RM437.8 billion.

Meanwhile, development expenditure (DE) is projected to rise to RM83 billion, from RM81 billion in Budget 2026, stated RHB IB in a research note today.

The investment bank said Budget 2027 is likely to remain mildly expansionary while maintaining the path of fiscal consolidation, with the fiscal deficit target potentially remaining at around 3.5 per cent of gross domestic product (GDP).

“The overall policy mix should therefore provide targeted near-term relief while preserving fiscal space for strategic investment and strengthening Malaysia’s medium-term growth potential,” it said.

The government is expected to announce Budget 2027, with the theme “Reaching for the Skies, While Anchored on Our Values”, on Oct 9, 2026.

The national budget will focus on five key prongs, namely, fiscal sustainability; inclusive growth and infrastructure development; social protection and cost-of-living support; strengthening the business and investment climate; and energy, food security and climate resilience.

It will likely prioritise Malaysia’s economic resilience while laying the foundations for sustainable medium-term growth.

“The government is expected to maintain targeted household support while directing resources towards advanced manufacturing, energy transition, aerospace and chemicals, alongside continued fiscal consolidation,” said RHB IB.

On the growth front, Budget 2027 is likely to reinforce the government’s structural transformation agenda through continued implementation of the New Industrial Master Plan 2030 (NIMP 2030), National Energy Transition Roadmap (NETR) and National Semiconductor Strategy (NSS).

In addition, climate and food-security considerations are also likely to feature more prominently, particularly given the potential impact of El Niño and increasingly volatile weather conditions.

Hence, additional allocations could be directed towards agricultural productivity, irrigation, water-resource management and climate adaptation, alongside targeted assistance for affected farmers and paddy growers, it said.

On development spending, key priorities are likely to include transport connectivity, water and electricity infrastructure, flood mitigation, healthcare and education, alongside continued development in Sabah and Sarawak and rural areas.

RHB IB does not anticipate the government introducing significant new taxes under Budget 2027.

Instead, the fiscal strategy is expected to prioritise revenue optimisation and fiscal consolidation, with greater emphasis on strengthening tax administration, closing revenue leakages and broadening the effective tax base within existing frameworks.

“On this basis, incremental revenue is likely to come primarily from refinements to the Sales and Service Tax (SST) framework, selective excise-duty measures and enhancing tax compliance,” it said.

RHB IB also expects Malaysia’s GDP growth at 4.9 per cent in 2027 versus 5.4 per cent in 2026, underpinned by resilient private consumption, strategic-sector capital deployment and key national initiatives.

It said investment should remain firm, supported by infrastructure rollouts, data-centre developments and manufacturing expansion, while private consumption should be buoyed by a healthy labour market and rising household incomes.

It added that external risks remain, particularly from United States tariff policy, the sustainability of the artificial intelligence (AI) investment cycle and geopolitical tensions, but Malaysia’s diversified economy and deep integration into regional and global supply chains should provide some buffer.

Inflation is expected to remain contained, with headline inflation forecast at 1.9 per cent in 2027 versus 2.1 per cent in 2026, where global commodity prices, domestic policy changes and food costs remain key risks.

However, stable domestic demand, a relatively stable ringgit and gradual price pass-through should help contain pressures, said RHB IB. — Bernama