Budget 2026: Balancing Stability, Growth, and Fiscal Health

Christina Chandra

29th September 2025 - 3 min read

The upcoming Budget 2026, set to be tabled on 10 October, is the first annual financial plan to align with the country’s new five-year blueprint, the 13th Malaysia Plan. Economic analysts are predicting that the government’s focus will be on maintaining stability and effectively implementing existing reforms, rather than introducing sweeping new taxes.

The approach may preserve both consumer and investor confidence amidst prevailing global economic uncertainties. Experts believe the budget will be structured around three key pillars: resilience, sustainability, and inclusivity, with a primary goal of strengthening the nation’s financial foundation.

A Measured Approach To Taxation

Economists do not anticipate any significant changes to individual or corporate tax rates. Instead, they predict the government is likely to rely on improving tax compliance through measures such as the ongoing rollout of e-invoicing and the registration of Tax Identification Numbers (TIN). The government is expected to expand non-tax revenue sources and strengthen enforcement to widen the tax net.

While there have been discussions about expanding the scope of the Capital Gains Tax (CGT) to include gains from the disposal of shares listed on Bursa Malaysia, this measure is considered to have a low probability of being implemented in the upcoming budget.

Similarly, further expansion of the Sales and Service Tax (SST) is not widely expected. A possible carbon tax has also been raised, although it is seen as more likely to start with pilot schemes, depending on regulatory readiness.

Financial Relief And Incentives For the Rakyat

With new taxes off the table, the government may consider introducing various reliefs and incentives to support the public. Proposals the experts are talking about include increasing income tax relief for parents’ medical expenses, life insurance, and education and medical insurance. There is also suggestion of an annual subsidy voucher for citizens aged 50 and above to help with nutritional supplements and health treatments.

To promote green energy, the budget might extend the Net Energy Metering programme, provide incentives for household battery adoption, and offer full exemptions on import duty and sales tax for key components. Such measures are vital for fostering economic growth while advancing sustainability goals.

Focusing on Key Economic Drivers

Malaysia’s Real Gross Domestic Product (GDP) growth is projected to be between 3.8% and 4.6% in 2026, driven by resilient domestic demand, infrastructure spending, and high-value sectors such as digital services and advanced manufacturing. The government is also expected to continue its subsidy rationalisation efforts, ensuring that assistance is more targeted and reaches those most in need.

Overall, this budget is being forecast as a delicate balance between consolidation, targeting a deficit between 3.3% and 3.5% of GDP, and supporting growth. Trade-offs designed to create a more resilient and equitable system for all Malaysians.

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