By Rozanna Latiff and Ashley Tang
KUALA LUMPUR, Oct 9 (Reuters) - Malaysia unveiled a host of tax relief measures on Friday and said it would raise minimum wages next year, as the government looked to boost household incomes and support small businesses ahead of a possible election despite growing fiscal pressure from a jump in global oil prices.
Speaking in parliament, Prime Minister Anwar Ibrahim proposed an expansionary budget of 459.8 billion ringgit ($112.48 billion) for 2027 and pledged to implement
reforms that he said would allow the country's strong economic growth to trickle-down to ordinary Malaysians.
"Our question is not just how the economy is to be built, but whether its growth will open up space for families to build savings, for workers to enjoy more dignified wages, for small businesses to continue to grow," he said.
Anwar's coalition has faced a series of setbacks in regional elections in recent months, with simmering tensions within his multi-party ruling alliance fuelling expectations of early national polls.
The next general election is not due until February 2028 but Anwar has said he may call for snap polls if internal divisions worsen.
The minimum wage, currently 1,700 ringgit per month, would be raised to 2,000 ringgit from June next year, though micro, small, and medium enterprises earning less than 50 million ringgit a year would be exempted from the measure for now to allow for business adjustments to be made, Anwar said.
He said wider income reforms were also underway including a move to raise minimum salaries for semi-skilled workers and graduates to 2,500 ringgit a month, to ensure they were compensated according to their ability levels.
The government would also expand individual tax relief from 9,000 ringgit to 12,000 ringgit a year, in the first such revision since 2010, he said.
OUTLOOK FOR 2026 GROWTH RAISED
Malaysia’s economy was expected to expand by between 4.2% and 5.2% from a year earlier in 2027, remaining resilient on sustained domestic demand, according to 2027 fiscal and economic outlook reports released with the budget.
Malaysia had in March raised its growth forecast for 2026 on a better-than-expected economic performance and hiked its projections further in its latest outlook.
Economic growth in 2026 was now expected to come in at the upper end of the projected range of 4.8% to 5.3%, faster than the previous estimate of 4% to 5%, the government said. The economy grew 5.7% in the first half of 2026.
Headline inflation was forecast to range between 1.8% and 2.8% in 2027 from a revised estimate of 1.5% to 2.5% in 2026, reflecting carry-over effects and lagged transmission of higher energy, food and other input costs, it added.
PETRONAS INCREASES DIVIDENDS TO GOVERNMENT
The 2027 spending plan, an increase of 3.6% over this year’s revised budget of 444.1 billion ringgit, includes development expenditure of 83 billion ringgit and operating expenditure of 376.8 billion ringgit, according to the government reports.
Revenue was seen rising by 4.7% to 380.8 billion ringgit in 2027, from a projected 363.6 billion ringgit this year on the assumption of resilient albeit moderating economic growth, the reports said.
State energy firm Petronas, a significant contributor to public coffers, will pay the government a dividend of 32 billion ringgit in 2027, up from a revised estimate of 27 billion this year. Petronas was initially due to contribute 20 billion ringgit in 2026.
Malaysia's annual subsidy bill has ballooned amid higher energy costs from the US-Israeli war on Iran, prompting a narrow upward revision of its 2026 fiscal deficit target to 3.6% of gross domestic product from 3.5%, the reports showed.
Higher fuel costs are expected to push subsidies and social assistance spending up to 74.5 billion ringgit this year, a jump of 34.7% from 2025's expenditure. In 2027, the government's subsidy spend was forecast to decline marginally to 72.7 billion ringgit.
Anwar, however, downplayed worries of fiscal slippage, saying Malaysia remained committed to its medium-term fiscal objectives. In 2027, the deficit was projected to decline to 3.3%, he said.
“This does not represent a departure from fiscal consolidation. It demonstrates the value of having built the capacity to respond when circumstances demand it,” he said in the foreword to the fiscal outlook report.
($1 = 4.0880 ringgit)
(Reporting by Rozanna Latiff and Ashley Tang; Editing by Martin Petty and Kim Coghill)
