While remaining committed to fiscal consolidation through reform measures delineated under the Public Finance and Fiscal Responsibility Act 2023, the government continues to work on a social safety net to safeguard the needs of citizens, in particular the vulnerable groups, including from economic shocks.
These measures include reforms to ensure a more impactful approach to disbursing aid.
At the same time, spending would focus on priorities that have the most impact, with the 13th Malaysia Plan providing an outline to address the challenges and guiding the country’s development over the 2026 to 2030 period.
This would include strategic investments by the government in areas such as trade and education deemed strategic and having long-term sustainable growth.
Lower consolidated public sector surplus
Despite higher expected revenue in 2025, the consolidated public sector (CPS) is estimated to post a lower current surplus of RM29.1bil, due to a reduced surplus from non-financial public corporations ( PCs).
The consolidated development expenditure (DE) is expected to decline by 2.7% to RM180.2bil reflecting lower capital expenditure in tandem with the final year of the 12th Malaysia Plan (12MP).
The CPS is expected to record a larger overall deficit of RM151.1bil in 2005 or 7.5% of gross domestic product (GDP), after netting off intra-transactions between public sector units, according to the Fiscal Outlook 2026 report.
In 2025, the consolidated general government revenue is projected to rise to RM402.5bil, driven by improved federal tax collection from revised sales and service taxes.
The consolidated operating expenditure (OE) is set to increase by 3.4% to RM385.2bil, mainly due to higher emoluments, narrowing the general government current surplus to RM17.2bil.
However, the consolidated DE is forecast to fall 4% to RM85.5bil, mainly due to the near completion of key 12MP projects.
The consolidated general government deficit is projected at RM68.2bil or 3.4% of GDP in 2025, after accounting for intra-transfers and net lending.
Meanwhile, the report noted that PCs’ aggregate revenue for 2025 could decline to RM446.5bil or 22.2% of GDP, with the reduction in revenue versus expenditure expected to reduce the current surplus to about RM14.6bil.
The projected decline in PCs’ revenue is mainly due to pressures in the oil and gas sector from lower global crude oil and liquefied natural gas prices.
In 2025, PCs’ total expenditure is projected at RM526.7bil, accounting for 26.1% of GDP. OE is expected to decline to RM432bil, reflecting efforts to boost efficiency and reprioritise spending amid changing costs.
Capital expenditure is projected at RM94.7bil, reflecting sustained investment in energy, infrastructure, and public utilities.
PCs’ deficit is expected to widen from RM57.8bil in 2024 to RM80.2bil in 2025, as revenue declines outpace expenditure cuts.
As of end-2024, PCs remained well-capitalised, with RM1.532 trillion in assets and RM792.8bil in liabilities, yielding net assets of RM735.2bil.
