Kuala lumpur: Budget 2026 must strike the right balance between fiscal consolidation and growth-supportive measures to ensure resilience in the banking sector and the broader economy, said RHB Banking Group.
According to BERNAMA News Agency, Group chief economist Barnabas Gan emphasized the government’s commitment to strengthening fiscal discipline while unlocking growth through micro, small and medium enterprise (MSME) support, digitalisation, and green finance. These efforts are deemed crucial for sustaining credit growth, creating jobs, and reinforcing long-term economic resilience.
Gan highlighted the banking sector’s top three priorities for Budget 2026 as fiscal stability, a stronger business climate, and advancing sustainable finance. He noted that a clear and measured path to fiscal consolidation would bolster investor confidence and reduce sovereign risk, with targets to narrow the fiscal deficit to 3.5 percent in 2026 and 3.2 percent in 2027.
He also pointed out that the banking industry would be
nefit from policies fostering growth in regions like Penang, Johor, and potentially Sarawak, coupled with incentives for high-growth sectors such as the digital economy, Islamic finance, renewable energy, and the electrical and electronics (E and E) industry.
Gan stressed the importance of continued support for MSMEs through preferential tax measures, credit guarantees, and digitalisation grants, which would create jobs, strengthen the corporate ecosystem, and drive credit demand.
On the topic of sustainable finance, Gan noted the potential of expanding green bonds, sukuk, and Environmental, Social and Governance (ESG)-linked lending. Strategic tax incentives could position Malaysia as a regional hub for green financing.
Looking ahead, Gan expects fiscal and monetary policies to broadly support credit growth in 2026. With anticipated infrastructure spending of about RM86 billion to RM89 billion, housing, MSME support, and social transfers, stronger domestic demand is expected. This stimulus is likely to tr
anslate into higher credit needs, ranging from project financing and corporate loans to mortgages and MSME lending.
He also projected that monetary policy would remain stable, with the Overnight Policy Rate (OPR) expected to stay at 2.75 percent through 2025, and inflation remaining moderate, ensuring borrowing remains affordable for households and businesses.
Gan further mentioned targeted tax reforms that would accelerate sustainability, digitalisation, and financial inclusion, further supporting the banking sector. For sustainability, extending incentives like the Green Technology Financing Scheme, stamp duty relief for green loans, and continued tax support for the sustainable and responsible investment (SRI) sukuk market would make green projects more bankable.
He added that capital allowances on investment costs and additional tax deductions on training expenses would effectively support digitalisation. As for financial inclusion, Gan suggested extending stamp duty exemptions for MSME loans, particul
arly for loans below RM150,000, and introducing loan restructuring measures to ease affordability for small businesses and vulnerable borrowers.