PETALING JAYA: Global crude oil prices, rather than government handouts, are expected to be the key factor influencing Malaysia’s fiscal outlook following Budget 2027, according to Apex Research.
The research house said the government’s fiscal projections for next year hinge on a significantly higher Brent crude oil price assumption of US$85 per barrel, compared with US$65 for 2026.
This has raised concerns over whether global oil prices can sustain such levels, with any shortfall potentially weighing on petroleum-related revenue and complicating the government’s fiscal consolidation efforts.
Apex Research said the key concern for markets is whether Brent crude prices can average above the US$85 per barrel assumption in 2027.
“Using our illustrative sensitivity of RM1.25bil of additional fuel subsidies for every US$1 per barrel increase in Brent, prices averaging US$100 per barrel in 2027 could add about RM19bil to the subsidy bill.
“That is equivalent to about 0.8% of gross domestic product (GDP) before revenue offsets or policy adjustments.
“This is a simplified scenario rather than an official fiscal forecast,” the research house said in a note.
Quoting the Treasury, Apex Research said Budget 2026 was prepared on a petrol subsidy assumption of about RM15bil.
The bill is now expected to reach RM40bil, and the budget keeps it at RM40bil for 2027.
“The Treasury added that higher oil and gas revenue has not covered the increase, because alternative crude supply is costlier, and described oil prices as stubbornly above US$100.”
Meanwhile, Apex Research cautioned that development expenditure disbursement could face pressure if crude oil prices remain elevated.
“This is our forecast, not a government decision.”
During the Maybank–MUFG post-Budget 2027 dialogue on Oct 16, the Finance Ministry acknowledged that higher subsidy costs squeeze what it can afford in development expenditure.
It also said the first two years of the 13th Malaysia Plan have run below the RM86bil annual average, and signalled a 2027 focus on smaller projects that can be executed within the same year.
Looking forward, Apex Research said that compliance, rather than new taxes, is the near-term revenue lever.
It said the Treasury indicated that Budget 2027 deliberately introduced no new taxes and will prioritise compliance.
The Inland Revenue Board’s initial e-invoicing-related “nudging” exercise generated RM1.5bil in additional tax assessments.
These are assessments raised and not necessarily cash collected.
The Treasury also said sales and service tax collections have reached 3.1% of GDP, comparable to the goods and services tax collections in 2017.
