Budget 2026 To Sustain Fiscal Consolidation Momentum - Maybank IB

KUALA LUMPUR, Oct 6 (Bernama) -- With the 2025 budget deficit on track to meet the target of 3.8 per cent of gross domestic product (GDP), Budget 2026 is expected to continue fiscal consolidation, aiming to narrow the deficit to 3.6 per cent of GDP, Maybank Investment Bank (Maybank IB) said today.

The expectation is premised on sustained revenue growth alongside resilient economic expansion, supporting higher operating expenditure for civil service salary and pension increases in the second and final phase, as well as essential public services and social assistance.

Maybank IB added that development expenditure is expected to remain stable, supplemented by domestic investment from government-linked investment companies (GLICs) under the GEAR-uP Programme and through public-private partnerships/private finance initiative projects.

The investment bank anticipates a “quieter” budget on tax measures after a series of new levies in 2024-2025.

"We see respite from new taxes versus 2024-2025 with the introduction of Capital Gains Tax and Low Value Goods Tax in 2024, Dividend Tax and Global Minimum Tax (GMT) in 2025 and Sales and Services Tax reviews in 2024-2025. 

“The only new tax we see coming in Budget 2026 is Carbon Tax (mentioned in Budget 2025 to start with iron and steel and energy industries), coupled with focusing on progress in the on-going implementation of GMT and e-invoicing,” the research note said.

Maybank IB noted potential “wildcards,” including excise duty increases on tobacco (last revised in 2015), alcoholic beverages (2016) and gaming taxes (2019) on public health and social grounds.

The bank also highlighted scope for expanding targeted subsidy rationalisation beyond electricity and fuel to address leakages and phase out temporary subsidies, such as those on liquefied petroleum gas, cooking oil, public healthcare, education, and sugar, following the end of temporary subsidies for chicken in 2023 and eggs this year.

Meanwhile, key economic and social measures under the 13th Malaysia Plan (13MP, 2026-2030) are expected to focus on income support and labour market reforms, including details on the multi-tier foreign workers levy and a proposed 10 per cent cap on foreign workers’ share of total employment.

-- BERNAMA