Malaysia Budget Highlights 2026
We are pleased to share a summary of key take aways from Malaysia’s Budget 2026 with this year theme “National Rejuvenation”, as delivered by the Prime Minister on 10 October 2025.
Economic outlook:
Malaysia’s economy is projected to grow between 4.0% and 4.5% in 2026. This growth will be underpinned by strong domestic demand, a stable labour market and continued recovery in key sectors such as services, tourism and manufacturing. While global uncertainties including geopolitical tensions and commodity price volatility pose some risks, Malaysia’s fundamentals remain strong.
The Government has committed to fiscal consolidation, targeting a lower deficit of 3.4% of GDP, down from 3.8% in 2025, with projected spending of RM470 billion. Projected revenue stands at RM343.1 billion and the focus remains on improving tax compliance and enforcement rather than introducing broad new taxes.
From a sectoral perspective:
- The services sector is expected to continue to drive growth, particularly in retail, logistics and finance.
- Manufacturing, especially in electrical and electronics, is expected to benefit from the global tech rebound.
- Construction activity is expected to rise, supported by infrastructure and civil work projects.
The green economy and digitalisation have been identified as key new growth drivers.
Inflation is expected to remain moderate at around 2.5% to 3.0%, while the Ringgit is projected to stabilise with improving investor confidence and policy clarity.
The labour market is expected to remain healthy, with unemployment projected at 3.3% to 3.5%, aided by upskilling and Technical and Vocational Education and Training (TVET) initiatives. Support for human capital development continues to be a major focus.
Tax and Fiscal measures:
Budget 2026 maintains a stable tax framework with no major new taxes introduced. Instead, the Government is focused on enhancing tax enforcement, improving compliance and closing existing loopholes to boost revenue.
Subsidy reforms, especially in fuel, are expected to continue gradually, with savings redirected to social
assistance and development spending.
In short, the deficit tax and fiscal measures for 2026 focuses on reinforcing its recent policies, including subsidy rationalisation, perceived public sector efficiency, facilitating a green transition and accelerating digital adoption. Overall, it may be deemed as a transient budget which does not disrupt the prevailing economic environment, for the better or otherwise.