Govt Likely To Table Expansionary Budget 2026, Deficit Seen Narrowing Gradually

By Nurunnasihah Ahmad Rashid

KUALA LUMPUR, Oct 8 (Bernama) -- The government is expected to table an expansionary Budget 2026, with the fiscal deficit projected at around 3.6 per cent of gross domestic product (GDP), compared with an estimated 3.8 per cent this year, according to an economist.

Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the government is likely to prioritise allocations for key sectors such as education, healthcare and infrastructure.

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“In line with the government’s cautious fiscal stance, and with no plans to undertake large scale mega projects - a fiscally prudent move given the current environment - greater emphasis is expected on rakyat-centric initiatives,” he told Bernama.

He said these may include basic infrastructure improvements such as roadworks, irrigation systems, flood mitigation, and the construction or refurbishment of schools and hospitals, all of which have a more direct impact on the wellbeing of the population.

Mohd Afzanizam noted that the fiscal deficit for the first half of 2025 had narrowed to RM40.5 billion (or 4.2 per cent of GDP) compared with RM51.6 billion (or 5.5 per cent of GDP) in the same period last year. He said the government appears on track to narrow the fiscal deficit gradually, with early signs of improvement already visible. “With the ongoing fiscal consolidation exercise, such as the introduction of new taxes, expansion of the sales and service tax scope, e-invoicing and subsidy rationalisation, the government should be able to reduce the fiscal deficit in a gradual manner,” he said.

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Prime Minister Datuk Seri Anwar Ibrahim, who is also the finance minister, is scheduled to table Budget 2026 in parliament on Oct 10.

-- BERNAMA