Malaysia's 2027 development spending seen up 3.8pct to RM83bil: CIMB Securities

KUALA LUMPUR: Malaysia's development expenditure (DE) under the 2027 Budget may rise a modest 3.8 per cent year-on-year to RM83 billion from RM80 billion this year.

CIMB Securities Sdn Bhd said the increase would come amid continued fiscal consolidation, with the government expected to reduce petrol and diesel subsidies by RM9 billion to RM32 billion in 2027.

This will provide some fiscal headroom for development projects, the firm said in a report today.

However, CIMB Securities does not expect the budget to provide a significant uplift to domestic construction news flow.

"Beyond the higher headline DE projections for 2027, we prefer to focus on project awards and execution, as certain allocations may relate to the balance of ongoing jobs rather than new tenders.

"Furthermore, the timing of project awards could be brought forward ahead of the 15th general election, which must be called by February 2028," it said.

For the first nine months of 2026, the value of domestic project awards reached RM177 billion,.

This is equivalent to 76 per cent and 72 per cent of the total value of jobs awarded in 2024 and 2025 respectively.

However, public-funded projects accounted for only RM37 billion, or 57 per cent and 63 per cent of the levels recorded in 2024 and 2025 respectively.

CIMB Securities expects infrastructure spending under the 2027 Budget to be focused largely on small- to mid-sized projects, particularly those aimed at closing development gaps in East Malaysia and other interior areas.

Key areas of spending could include water infrastructure and pipe replacements, flood mitigation, rural infrastructure and grid investments.

"Potential big-ticket infrastructure tenders under the 2027 Budget include the second phases of the Rasau and Langat 2 water supply schemes, Civil Main Contract 3 of the Penang Mutiara Line LRT, the Northern Perak Water Supply Scheme, and new road and utility projects in Sabah and Sarawak," it said.

Meanwhile, the firm expects building tender activity to slow in the fourth quarter of 2026 as property developers delay launches amid rising construction costs and weaker take-up rates.

CIMB Securities maintained its "Neutral" stance on the construction sector, with Gamuda Bhd and IJM Corp Bhd as its preferred picks.