RELIEF TO MOVE BEYOND LOWER-INCOME HOUSEHOLDS?
Economists expect middle-income households, known in Malaysia as the M40 (middle 40 per cent), to receive greater attention in the budget alongside continued support for lower-income groups.
Lee Hwok Aun, a senior fellow and co-coordinator of the Malaysia Studies Programme at ISEAS-Yusof Ishak Institute, told CNA that “emphatic commitments” to cash assistance – some targeted at low- to middle-income households and some universal for all Malaysian adults – can be expected.
JPMorgan Chase said in a report that the M40 had moved up the cost-of-living agenda, with Anwar making the group a central focus.
“Budget 2027 puts greater attention on the M40 squeeze alongside continued support for lower-income households,” read the paper.
It said that as the subsidy rationalisation continued for the RON95 petrol, it expected savings to be partly redirected towards targeted assistance and measures addressing recurring costs across food, housing, transport, healthcare, education and childcare.
The finance ministry highlighted support for the middle class in its Aug 18 pre-budget statement, including RM150 (US$37) in student schooling aid and two RM100 cash grants for all adults nationwide.
The ministry also emphasised tax breaks targeted at the middle class, such as exemptions for first-home purchases, expanded insurance premium deductions for children, and tax relief for early childhood education (up to RM3,000) and special needs therapy (up to RM10,000).
Analysts stress that such safety nets will be vital to buffer against incoming economic headwinds.
Economist Sedek Jantan of IPP, a financial planning group in Malaysia, said targeted assistance could become more important if a stronger El Nino in 2027 puts further strain on food production and prices.
“This could put renewed pressure on household purchasing power. However, the key question is whether these measures are fiscally sustainable,” he told CNA.
“I would expect the focus to increasingly be on targeted assistance rather than broad-based measures, so that support reaches those who need it most without creating a persistent burden on government finances.”
That constraint remains important even as government spending rises. UOB projects expenditure to reach a record RM445.9 billion – equivalent to 19.6 per cent of the GDP – while the fiscal deficit narrows to 3.3 per cent of GDP from an estimated 3.5 per cent this year.
“This would reinforce the government’s commitment to gradual fiscal consolidation, striking a balance between supporting growth and preserving medium- to long-term fiscal sustainability,” UOB said.
