Finance Ministry secretary general of treasury Datuk Johan Mahmood Merican
KUALA LUMPUR: Budget 2026 is largely a “cautious” budget, which takes into account the external challenges that lie ahead, experts say.
Panellists at a post-budget debate held here yesterday agreed that by and large, global growth, primarily that of China and the United States will continue to impact the Malaysian economy.
Apurva Sanghi, World Bank lead economist for Malaysia, said while this year will be a year of resilience, next year will be a year of restraint.
“With Malaysia’s external position having been quite strong, together with a foreign exchange reserve that is adequate, and sound financial stability, this year is going to be one of resilience but I don’t think we can say the same for next year,” he said during the debate.
“There are three main reasons for this, the first of which is slowing global growth which could be worse than what you may expect,” he said.
“Firstly global growth will be muted. Secondly, there will be unwinding of exports.
“As a result of front loading because of US tariffs, export growth is now slowing, it is expected to be flat this year and next year, and finally growth in imports will also slow down.”
He also sounded a note of caution in terms of domestic demand.
“Business confidence is low, the purchasing managers index is flat and firms are basically adopting a wait-and-see approach.
“For next year, we shouldn’t pretend that things will be better than they are,” he added.
Apurva also criticised Malaysia’s current targeted subsidy programme for RON95 petrol, stating that “it’s hard to see the math” in it.
“How many Malaysians will exceed the 300 litre quota, where are the savings coming from? But if this is part of a broader plan, why doesn’t the government make it known to the public,” he said, adding that the subsidy may not address inefficiency and abuse of the system.
Under the new petrol subsidy, eligible Malaysian citizens can buy up to 300 litres of RON95 petrol per month at a subsidised price of RM1.99 per litre.
Disagreeing with Apurva, Finance Ministry secretary general of treasury Datuk Johan Mahmood Merican said that similar issues exist in other countries and the new system addresses inefficiency by excluding non-Malaysian from accessing subsidised fuel.
Johan Mahmood stressed that Budget 2026 is focused on three main pillars, primarily administration and governance, raising the ceiling and raising the floor, which includes addressing the costs of living and strengthening social systems.
University of Nottingham Malaysia associate professor of practice Tricia Yeoh said that Budget 2026 is a “cautious” budget.
Yeoh also raised concerns about the government having to roll back assistance programs such as the Sumbangan Asas Rahmah or Sara and the petrol subsidies in the future.
“If the revenue as a percentage of gross domestic product is actually falling, how are we going to have sustainability for some of these wide-ranging cash transfers that I don’t think the government will be able to roll back in the future.
“For example, you have given RM100 to all eligible Malaysians this year and next year as well, it’s going to be very difficult to stop this in the future. In fact, you’ve started something of a trend so all Malaysians are going to start to expect it,” Yeoh said.
She also noted that there were several “missed opportunities” in Budget 2026, such as those linked to the goods and services tax or GST.
Johan Mahmood noted that under Budget 2026, taxes were not as heavily addressed as they were in the last two budgets since the focus now was shifting to enforcement of the tax measures previously announced.
Meanwhile, speaking before the start of the debate, president of the Malaysian Economic Association Yeah Kim Leng said institutional credibility is extremely crucial.
“A credible framework and consistent communication are among the best forms of insurance an emerging economy can have in uncertain times.
“Our greatest asset is not immunity to shocks but credibility and the ability to have open dialogue, among others,” Yeah said.
