By Karina Imran
KUALA LUMPUR, Oct 7 (Bernama) -- Budget 2026 must strike the right balance between fiscal consolidation and growth-supportive measures to ensure resilience in the banking sector and the broader economy, said RHB Banking Group.
Group chief economist Barnabas Gan said the government’s commitment to strengthening fiscal discipline while unlocking growth through micro, small and medium enterprise (MSME) support, digitalisation and green finance would be crucial to sustaining credit growth, creating jobs and reinforcing long-term economic resilience.
“Our view of the banking sector’s top three priorities for Budget 2026 is fiscal stability, a stronger business climate, and advancing sustainable finance,” he told Bernama when asked about the banking sector’s wishlist for the upcoming announcement on Oct 10.
Gan also emphasised that a clear and measured path to fiscal consolidation would bolster investor confidence and reduce sovereign risk, citing targets of narrowing the fiscal deficit to 3.5 per cent in 2026 and 3.2 per cent in 2027.
He said the banking industry would also benefit from policies that further develop growth corridors in Penang, Johor and potentially Sarawak, alongside incentives for high-growth sectors such as the digital economy, Islamic finance, renewable energy and the electrical and electronics (E&E) industry.
“Continued support for MSMEs through preferential tax measures, credit guarantees and digitalisation grants will create jobs, strengthen the corporate ecosystem and drive credit demand,” he added.
On sustainable finance, Gan noted that expanding green bonds, sukuk and Environmental, Social and Governance (ESG)-linked lending, together with strategic tax incentives, would position Malaysia as a regional hub for green financing.
Looking ahead, Gan expects both fiscal and monetary policies to remain broadly supportive of credit growth in 2026.
“With Budget 2026 expected to prioritise infrastructure spending of about RM86 billion to RM89 billion, housing, MSME support and social transfers, stronger domestic demand is anticipated.
“This stimulus will translate into higher credit needs, from project financing and corporate loans to mortgages and MSME lending,” he added.
He also projected monetary policy to remain stable, with the Overnight Policy Rate (OPR) expected to remain at 2.75 per cent through 2025 and inflation staying moderate, ensuring borrowing remains affordable for households and businesses.
Meanwhile, Gan said targeted tax reforms that accelerate sustainability, digitalisation and financial inclusion would further support the banking sector.
“For sustainability, extending incentives such as the Green Technology Financing Scheme, stamp duty relief for green loans and continued tax support for the sustainable and responsible investment (SRI) sukuk market will make green projects more bankable,” he said.
He added that capital allowances on investment costs and further tax deductions on training expenses would effectively support digitalisation.
As for financial inclusion, Gan suggested extending stamp duty exemptions for MSME loans, particularly for loans below RM150,000, and introducing loan restructuring measures to ease affordability for small businesses and vulnerable borrowers.
-- BERNAMA
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