BMI Expects Malaysia’s Budget Deficit To Narrow To 3.6 Pct In 2026

KUALA LUMPUR, Oct 14 (Bernama) -- BMI, a Fitch Solutions company, expects Malaysia’s budget deficit to narrow from an estimated 3.9 per cent of gross domestic product (GDP) in 2025 to 3.6 per cent in 2026,  broadly in line with the government’s fiscal projections.

The projection was made in view of the current administration’s track record of adhering closely to its targets, it said.

“The budget also marks a positive step towards Malaysia’s medium-term goal of narrowing its budget deficit to three per cent of GDP by 2028,” it said in a statement today.

On Oct 10, Prime Minister Datuk Seri Anwar Ibrahim, who is also Finance Minister, unveiled the proposed Budget 2026, under which the government allocates RM419.2 billion in expenditure.

The government expects the fiscal deficit to narrow to 3.5 per cent of GDP in 2026, down from an estimated 3.8 per cent in 2025.

This will be driven by a 2.7 per cent year-on-year increase in revenue, despite a 1.8 per cent increase in overall expenditure.

Policymakers also project real GDP growth of between four and 4.5 per cent in 2026, easing from a downwardly revised four to 4.8 per cent in 2025 (4.5 to 5.5 per cent previously).

BMI said that, unlike previous budgets, Budget 2026 signalled a pause in revenue-raising initiatives.

Apart from reinforcing the rollout of a carbon tax in 2026, which will cover iron, steel and energy, no new taxes will be introduced, it said.

“In addition, the government expects state-owned energy firm, Petroliam Nasional Bhd’s dividend payments to amount to RM20 billion in 2026.

“While this would mark the lowest level in nine years amid moderate oil prices, it aligns with policymakers’ broader goal of reducing reliance on petroleum-related income,” it added.

-- BERNAMA