Kuala lumpur: The Malaysian government's revenue collection in the first five months of 2026 has exceeded expectations, providing additional fiscal space to address rising global energy prices, according to AmBank Group chief economist Firdaos Rosli. The revenue performance during this period surpassed that of 2025 and 2024, offering the government more flexibility in its spending decisions.

According to BERNAMA News Agency, Firdaos highlighted that the federal government's total revenue increased by 11 per cent to RM138.4 billion in 5M2026, compared to RM124.8 billion in the same period last year. Budget 2026 projected a total revenue of RM343.1 billion, with actual collections reaching 40.3 per cent of the full-year target in 5M2026, up from 36.7 per cent in 2025 and 2024.

Total spending also rose by 9.7 per cent to RM173.9 billion, representing 41.6 per cent of the 2026 budget, compared to 37.8 per cent in the previous year. The government anticipates the fiscal deficit to narrow to RM74.6 billion in 2026 from RM79.9 billion in 2025, supported by stronger revenue despite higher expenditure.

However, with increased spending, the fiscal balance in 5M2026 stood at 47.5 per cent of the full-year budgeted deficit, compared to 42.2 per cent in 2025. Firdaos noted that the stronger fiscal position allowed the government to implement measures to shield households from rising costs through fuel subsidies and support employment and business continuity.

Firdaos stated that there remains room for further support if necessary, bolstered by fiscal space rebuilt through sustained fiscal consolidation efforts in recent years. He commended the government for improving revenue collection without significantly impacting growth prospects in 2026.

On the fiscal outlook, Firdaos mentioned that Malaysia's fiscal deficit target of 3.5 per cent of GDP in 2026 is achievable, provided revenue collection exceeds expectations in the second half of 2026. However, he warned of potential risks, such as slower economic growth due to external factors and weaker revenue collection in 2H2026.

Finance Minister II Datuk Seri Amir Hamzah Azizan recently indicated that the fiscal deficit might slightly exceed the government's 3.5 per cent of GDP target for 2026, but the medium-term fiscal consolidation path towards a 3.0 per cent deficit by 2028 remains intact. Firdaos emphasized the importance of maintaining a commitment to fiscal consolidation once growth conditions improve.

Firdaos concluded that while the government's fiscal consolidation strategy relies on strengthening revenue collection and aligning expenditure growth with fiscal deficit targets, policymakers should prioritize measures that sustain Malaysia's growth momentum amid intensifying external pressures.