Kuala lumpur: BMI, a Fitch Solutions company, expects Malaysia’s budget deficit to narrow from an estimated 3.9 per cent of gross domestic product (GDP) in 2025 to 3.6 per cent in 2026, aligning closely with the government’s fiscal projections. The projection reflects the current administration’s consistent adherence to its targets.

According to BERNAMA News Agency, the budget marks a step towards Malaysia’s medium-term goal of reducing the budget deficit to three per cent of GDP by 2028. On October 10, Prime Minister Datuk Seri Anwar Ibrahim, who is also the Finance Minister, revealed the proposed Budget 2026, allocating RM419.2 billion for government expenditure. The government anticipates the fiscal deficit to narrow to 3.5 per cent of GDP in 2026 from an estimated 3.8 per cent in 2025, driven by a 2.7 per cent year-on-year growth in revenue despite a 1.8 per cent rise in overall expenditure.

Policymakers forecast real GDP growth of between four and 4.5 per cent in 2026, slightly easing from the revised projection of four to 4.8 per cent in 2025. BMI highlighted that unlike previous budgets, Budget 2026 indicates a pause in revenue-raising initiatives. Besides reinforcing the planned rollout of a carbon tax in 2026 for sectors like iron, steel, and energy, no new taxes will be implemented.

The government also expects dividend payments from the state-owned energy firm, Petroliam Nasional Bhd, to total RM20 billion in 2026. Though this amount represents the lowest level in nine years due to moderate oil prices, it aligns with broader policy goals to reduce reliance on petroleum-related income.