SME
13 October 2025
Budget 2026 Shows Malaysia Is Open for High-Value Business, Economist Says
The Malaysian Budget 2026 that was recently announced by Prime Minister Datuk Seri Anwar Ibrahim marks a decisive shift in Malaysia’s economic direction, from subsidy-driven consumption to investment-driven transformation, as the government pursues fiscal consolidation while sustaining growth momentum.
Nevertheless, economists emphasised that execution remains the key test of credibility of the financial management measures laid down under the budget.
KSI Strategic Institute for Asia Pacific senior economic advisor and SME National Council member Anthony Dass said the government’s ability to sustain growth between 4% and 4.5% while narrowing the fiscal deficit to 3.5% demonstrates credible fiscal resilience amid global headwinds.
“This is not an austerity budget. It is a growth-discipline budget. Leakage control, subsidy rationalisation and enforcement recoveries of RM15.5 billion have created fiscal room for investments in the sectors that matter most: productivity, education, healthcare and energy transition,” he opined.
According to Dass, the government’s total public outlay of RM470 billion reflects a disciplined yet pragmatic approach, allowing Malaysia to balance fiscal realism with developmental ambition.
“Malaysia is shifting away from short-term subsidy dependence towards long-term investment in capability and competitiveness. That is the real transformation taking shape under Budget 2026,” he noted.
Dass said the budget extends a clear signal that Malaysia is open for business, but on higher-value terms, with measures that encourage firms to scale, digitize and decarbonise.
Among the initiatives are RM10 billion in SME financing and guarantees, 10-year tax incentives for venture capital and a RM3 billion Green Investment Fund under Bank Pembangunan Malaysia Bhd (BPMB).
He added that the alignment of fiscal tools with national strategies will strengthen investor confidence and crowd in institutional capital through Khazanah Nasional Bhd and Retirement Find (Inc) and BPMB.
“The tone of Budget 2026 signals credible policy continuity – something both markets and investors have long demanded,” he said, adding that the green, digital and regional transformation agenda underpins Malaysia’s shift towards high-value sustainable growth.
He also welcomed the government’s emphasis on inclusivity through record allocations to Sabah and Sarawak for roads, utilities and digital infrastructure, calling it a move that transforms regional inclusion into an economic strategy, not merely social equity.
Meanwhile, Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said the budget demonstrates the government’s ongoing commitment to fiscal discipline while ensuring economic growth remains sustainable.
He said the total allocation of RM419.2 billion remains sizeable and reflects the government’s careful balance between reform and resilience.
Afzanizam added that domestic demand will continue to anchor Malaysia’s growth in 2026, led by a 5.4% expansion in private consumption and steady investment growth of 7.7%, even as external demand is expected to remain weak.
He said the government’s targeted assistance such as the Sumbangan Tunai Rahmah (STR), Sumbangan Asas Rahmah (SARA) and support for micro entrepreneurs under Syarikat Jaminan Pembiayaan Perniagaan (SJPP) guarantees, would help cushion lower-income households while sustaining consumption.
He also highlighted the government’s tax exemption incentives for agri-food investments, which could help strengthen Malaysia’s food security and self-sufficiency levels.
The economists agreed that the Budget 2026 frameworks is reformist yet realistic, striking a balance between fiscal consolidation and growth supported by targeted subsidies, institutional reform green investments.
However, Das emphasized that execution remains the key test of credibility.
“The budget’s architecture is sound. The issue is not allocation but absorption. Incentives and funds must translate into faster disbursement, lower bureaucracy and measurable outcomes,” he said, cautioning that Malaysia must ensure the savings from subsidy rationalisation are channelled into productive investments rather than short-term populism, while the Progressive Wage Model must be anchored on real productivity gains, not compliance burdens.
(Web Source: https://sme.asia/budget-2026-shows-malaysia-is-open-for-high-value-business-economist-says/)