Fiscal Consolidation Targets at Risk as Brent Crude Oil Prices Soar Above US$100

A sharp increase in Brent crude oil prices has put Malaysia's fiscal consolidation targets at risk. According to Yeah Kim Leng, an economics professor at Sunway University, a prolonged period of crude oil prices above US$100 per barrel would require the government to revise its oil-price assumption used in preparing Budget 2027.

Budget 2027 is scheduled to be tabled on October 9. If the assumption is revised upward to US$80 to US$90 per barrel, the allocation for fuel subsidies would need to increase substantially.

The subsidy bill for 2026 could rise above RM40 billion if crude oil remains above US$100 per barrel, compared with the initial allocation of RM15 billion under Budget 2026. However, Malaysia's position as a net energy exporter will partly cushion the effect, with an estimated RM3 billion in additional revenue for every US$10 increase in Brent crude prices.

Economist Yeah Kim Leng warned that higher subsidy spending would challenge Malaysia's fiscal consolidation targets, making it harder to achieve the 3.5% target this year. He also cautioned that persistently high energy prices will produce mixed effects across the Malaysian corporate sector, with some sectors benefiting while others are pressured by higher fuel and input costs.