Kuala lumpur: Budget 2026 marks a decisive shift in Malaysia’s economic direction from subsidy-driven consumption to investment-driven transformation as the government pursues fiscal consolidation while sustaining growth momentum, economists said.
According to BERNAMA News Agency, senior economic advisor to the KSI Strategic Institute for Asia Pacific and Small and Medium Enterprise (SME) National Council member, Anthony Dass, said the government’s ability to sustain growth between 4.0 and 4.5 per cent while narrowing the fiscal deficit to 3.5 per cent demonstrates credible fiscal resilience amid global headwinds. Dass described the budget as a “growth-discipline budget” rather than an austerity one, highlighting measures like leakage control, subsidy rationalisation, and enforcement recoveries of RM15.5 billion that have created fiscal room for investments in productivity, education, healthcare, and energy transition.
The government’s total public outlay of RM470 billion reflects a disciplined yet pragmatic approach, allowing Malaysia to balance fiscal realism with developmental ambition. Dass mentioned that Malaysia is moving away from short-term subsidy dependence towards long-term investment in capability and competitiveness, indicating the real transformation under Budget 2026. Furthermore, initiatives such as RM10 billion in SME financing and guarantees, 10-year tax incentives for venture capital, and a RM3 billion Green Investment Fund under Bank Pembangunan Malaysia Bhd (BPMB) are part of this strategic shift.
Dass also noted that aligning fiscal tools with national strategies, such as the National Semiconductor Strategy (NSS), New Industrial Master Plan 2030 (NIMP 2030), and the National Energy Transition Roadmap (NETR), will strengthen investor confidence and attract institutional capital through entities like Khazanah Nasional Bhd and Retirement Fund (Incorporated). He emphasized the government’s focus on inclusivity with record allocations to Sabah and Sarawak for infrastructure, transforming regional inclusion into an economic strategy.
Meanwhile, Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid stated that the budget demonstrates the government’s ongoing commitment to fiscal discipline while ensuring sustainable economic growth. He pointed out that the total allocation of RM419.2 billion reflects a careful balance between reform and resilience, with domestic demand expected to anchor Malaysia’s growth. Targeted assistance measures like Sumbangan Tunai Rahmah (STR) and Sumbangan Asas Rahmah (SARA) are designed to cushion lower-income households while sustaining consumption.
Mohd Afzanizam also highlighted tax exemption incentives for agri-food investments, which could bolster Malaysia’s food security and self-sufficiency. Both economists agreed that Budget 2026 is reformist yet realistic, balancing fiscal consolidation and growth through targeted subsidies, institutional reform, and green investments. Dass stressed that execution remains the key test of credibility, warning that savings from subsidy rationalisation must be directed towards productive investments rather than short-term populism.
Dass concluded that while the budget’s architecture is sound, the success will depend on the government’s ability to ensure efficient execution, emphasizing that incentives and funds must lead to faster disbursement, reduced bureaucracy, and measurable outcomes.