Domestic Demand, Investments To Continue To Drive Malaysia’s Growth Trajectory At 4.2-5.2 Pct In 2027
KUALA LUMPUR, Oct 9 (Bernama) -- Malaysia's economy is projected to expand by a commendable 4.2-5.2 per cent in 2027, from 4.8-5.3 per cent this year, supported by sustained domestic demand, favourable labour market conditions, continued income growth and firm investment activity, according to the Ministry of Finance (MoF) today.
As Malaysia approaches its 70th year of independence next year, the priority remains focused on driving high-value economic growth, enhanced productivity and greater inclusivity, in line with the nation’s aspiration to become one of the world's top 30 largest economies, building on its current global ranking of 33rd.
The MoF in its Economic Outlook 2027 as well as Fiscal Outlook and Federal Government Revenue Estimates 2027 reports released today, nevertheless reiterated that investment should generate stronger domestic capabilities, deepen linkages with local firms, create high-paying jobs and improve living standards.
Private consumption will remain a key growth driver, supported by sustained household purchasing power and continued expansion in tourism, retail, transportation and other services in conjunction with Visit Malaysia (VM) 2026-2027.
Investment activity is expected to remain robust, underpinned by the realisation of approved investments and strategic initiatives under the 13th Malaysia Plan, New Industrial Master Plan 2030 (NIMP 2030), National Semiconductor Strategy (NSS) and National Energy Transition Roadmap (NETR).
The ministry noted that private investment is projected to expand by 7.1 per cent in 2027, supported by continued capital expenditure, particularly in the technology-intensive services and manufacturing sectors, while public investment is expected to expand by 6.8 per cent in 2027, driven by targeted development spending and steady capital outlays.
The total federal government expenditure for Budget 2027, which is the fifth MADANI Budget, is estimated at RM459.8 billion, equivalent to 19.8 per cent of gross domestic product (GDP) and is expected to bolster the country’s economic expansion.
Of the total, MoF said RM376.8 billion (RM363.1 billion in 2026) or 81.9 per cent is allocated for operating expenditure (OE), while the remaining RM83 billion (RM81 billion in 2026) is earmarked for development expenditure (DE).
It said expenditure will remain concentrated on rakyat-centric projects and programmes, with 30.2 per cent of the total allocation channelled to the Education Ministry, Health Ministry and Defence Ministry.
Hence, Budget 2027 would ensure households are protected through targeted assistance, complemented by better access to infrastructure, education, healthcare, mobility and social protection.
“Achieving these outcomes demands fiscal discipline, sound governance and credible institutions,” it said.
As such, MoF said policy commitments must translate into timely implementation, clear accountability and measurable outcomes.
“The MADANI Economy framework will continue to serve as a coherent delivery agenda, raising the national potential, while improving the rakyat's living standards,” it said.
Government revenue is estimated to increase by 4.7 per cent to RM380.8 billion in 2027, of which RM32 billion is expected to be contributed by Petroliam Nasional Bhd (Petronas) dividends, higher than 2026's estimated dividend of RM27 billion.
As for the ringgit’s performance, it strengthened in early 2026, appreciating by 4.3 per cent against the US dollar over the first two months of the year.
However, the positive momentum was subsequently reversed following the escalation of the West Asia conflict at the end of February 2026, with the ringgit depreciating by 3.3 per cent against the US dollar at end-August 2026.
Nevertheless, on a year-to-date basis, the ringgit appreciated by 0.9 per cent against the US dollar as at end-August 2026, strengthened against most major and regional currencies, including the euro (1.7 per cent), Japanese yen (3.0 per cent), Philippine peso (6.7 per cent), Indonesian rupiah (6.6 per cent) and Thai baht (5.1 per cent).
The ministry said fiscal deficit is projected to further narrow to 3.3 per cent of gross domestic product (GDP) in 2027 (2026: 3.6 per cent), with consolidation calibrated to economic conditions and anchored by sustainable revenue improvements and expenditure efficiency.
Economic Prospects
The MoF said the services sector is projected to register a strong growth of 5.2 per cent in 2027, with all subsectors expected to perform positively.
The growth will be anchored by high-value digital services and resilient private consumption alongside higher visitor arrivals following VM2026-2027.
The manufacturing sector is projected to grow by 4.1 per cent in 2027, attributed by a moderate expansion in export-oriented industries.
Growth in the electrical and electronics (E&E) segment is expected to remain stable, supported by sustained demand for artificial intelligence (Al)-related products, despite the easing of the global semiconductor cycle in 2027.
Meanwhile, the agriculture sector is projected to rebound and improve marginally by 0.5 per cent in 2027.
Crude palm oil (CPO) prices are expected to remain high, averaging between RM4,450 and RM4,600 per tonne in 2027 compared to RM4,300 to RM4,500 per tonne this year, in tandem with tighter supply conditions.
The mining and quarrying sector is projected to expand by 1.2 per cent in 2027, supported by both the natural gas and crude oil and condensate subsectors.
The construction sector is forecast to register a growth of 5.7 per cent in 2027, driven by continued activities across all subsectors.
The MoF said domestic demand is forecast to increase by 5.1 per cent next year, underpinned by the continued growth in private sector expenditure at 5.3 per cent.
“Resilient consumption and investment activities are expected to sustain the private sector's contribution to gross domestic product (GDP) growth at 4.1 ppt,” it said.
Private consumption is projected to grow by 4.8 per cent in 2027, supported by sustained domestic economic activities and favourable employment prospects, while private investment is projected to expand by 7.1 per cent in 2027, supported by continued capital expenditure.
As for public consumption, MoF said it is projected to grow by 3.2 per cent in 2027 with growth supported by emolument spending and expenditure on supplies and services.
External Sector
On the external sector, the MoF said gross exports in 2027 are forecast to increase by 3.0 per cent, driven by buoyant demand for manufactured goods, mining goods and agriculture goods.
It said exports of manufactured goods are projected to expand by 2.6 per cent, following steady performance in the E&E industry, particularly semiconductors, backed by continuous demand for AI-related products.
Likewise, receipts from mining goods are anticipated to grow by 8.3 per cent, attributed to sustained exports of liquefied natural gas (LNG), crude petroleum as well as metalliferous ores and metal scrap, while exports of agriculture goods are projected to rise by 4.8 per cent, mainly driven by higher shipments of palm oil and palm oil based agriculture products.
Meanwhile, gross imports are estimated to expand by 3.5 per cent on the back of higher imports of intermediate goods, capital goods and consumption goods.
“Higher imports are expected particularly in the healthcare and education sectors as well as infrastructure projects towards the implementation of rakyat-centric projects,” it said.
As for the total trade performance for 2026, MoF estimated it to surge by 27.2 per cent to RM3.9 trillion in 2026, boosted by the global technology upcycle and favourable energy sector.
Headline Inflation
According to the Economic Outlook 2027 report, headline inflation is projected to range between 1.8 per cent and 2.8 per cent in 2027, reflecting carry-over effects and lagged transmission of higher energy, food and other input costs.
“Inflation is expected to be firmer in the early months of 2027 before easing as the impact of earlier cost increases diminishes and upstream costs gradually normalise.
“Domestic price pressures are anticipated to remain manageable, with economic activity unlikely to generate demand-pull inflationary pressures,” MoF said.
Nevertheless, it said services-related categories, including food away from home, housing-related services and personal care remain the main sources of underlying price pressure.
It also said that risks to the outlook are tilted to the upside.
“A renewed escalation of geopolitical tensions, prolonged disruptions to energy and supply chains, higher freight and fertiliser costs as well as weather-related food supply shocks can lead to stronger and more persistent inflation,” MoF said.
The ministry said a faster normalisation of global crude oil and food prices, stronger ringgit and softer domestic demand could keep inflation below the baseline projection.
Labour Market
Total employment is projected to expand by 2.0 per cent to 17.2 million persons in 2027, with the services and manufacturing sectors continuing to account for more than 80 per cent of employment opportunities.
The labour market in 2027 is set to remain resilient, anchored by robust domestic demand despite persistent geopolitical and trade-related headwinds.
On the supply side, MoF said structural reforms under the MADANI Economy framework such as strengthened wage structures, expanded social protection and improved workplace environments are expected to boost labour force participation.
“On the demand side, targeted implementation of national master plans, including the 13th Malaysia Plan 2026-2030 (13MP), NSS and National Energy Transition Roadmap (NETR) are anticipated to accelerate job creation,” it said.
Accordingly, the unemployment rate is expected to remain low at 3.0 per cent in 2027.
Under the 13MP, the threshold of foreign workers will not be allowed to exceed 10 per cent of total employment by 2030.
Therefore, MoF said the number of low-skilled foreign workers is expected to continue to decrease in 2027.
Labour productivity is projected to increase by 3.7 per cent to RM112,098 in 2027, primarily driven by sustained productivity momentum in the services sector, particularly tourism-related industries following the VM2026-2027.
Global Economic Outlook
As for the global outlook, MoF said GDP growth is projected to grow moderately at 3.0 per cent in 2026 and 3.4 per cent in 2027, mainly supported by accelerated demand-driven momentum in the global technology sector resulting from advances in AI.
It said the outlook is uneven as the conflict in West Asia continues to weigh on energy importers and vulnerable economies, while Al-driven demand will elevate countries that are integrated in the global technology value chain.
Growth in advanced economies is expected to expand modestly while emerging markets and developing economies will continue to be the major driver of global economic activities.
“The expansion is also supported by easing inflation and gradually less restrictive monetary policy, providing added impetus to investment and trade activities,” it said.
As a trading nation, MoF said it is imperative for Malaysia to sustain economic growth by continuing to diversify export markets, strengthen regional integration and enhance supply chain resilience, while preserving macroeconomic and financial stability.
-- BERNAMA