CIMB Research said investor sentiment following the tabling of Budget 2026 has been largely positive across institutional and corporate circles.
PETALING JAYA: Malaysia’s 2026 outlook is turning increasingly upbeat, buoyed by fiscal consolidation, targeted subsidy reforms and structural investment momentum that could anchor stronger growth and a firmer ringgit over the next year.
According to CIMB Research, investor sentiment following the tabling of Budget 2026 has been largely positive across institutional and corporate circles.
“Our investor poll, comprising high-level executives from institutional, corporate, and wholesale clients, revealed broadly positive sentiment toward Malaysia’s 2026 outlook,” the brokerage said in its report.
“Around 67.6% of respondents are optimistic about the economy and business environment, while 53.1% believe Budget 2026 has improved their outlook,” it added.
CIMB Research noted that targeted welfare and subsidy measures were viewed as the most impactful policy priority (41.9%), followed by capital and infrastructure spending (38.7%), which could further lift sentiment, especially as 54.8% remain neutral on domestic investment expansion.
The research house’s findings also pointed to stable monetary expectations, with 46.7% expecting the overnight policy rate (OPR) at 2.50%, 40% at 2.75% and 13.3% at 2.25% in 2026.
“We expect Bank Negara Malaysia to stay on hold in November, with scope for easing in the first quarter (1Q) of 2026 if non-electrical and electronics exports weaken,” CIMB Research said.
On the currency front, the brokerage highlighted the government’s confidence in a stronger ringgit, citing that the “Finance Minister II highlighted the potential for the ringgit to strengthen to just below four against the US dollar within 12 months”.
“Our poll indicates that 73.3% of respondents expect the ringgit to trade between four and 4.20, broadly in line with our forecast (4Q26: 4.13).
“Overall, sentiment suggests further upside for the ringgit, underpinned by fiscal consolidation, disciplined RM470bil spending with government-linked investment company (GLIC)/public-private partnership (PPP) leverage, improving revenue execution, ongoing subsidy rationalisation, robust investment approvals (RM190.3bil in the first half of 2025 (1H25), and positive investor sentiment (67.6% optimistic on Malaysia’s 2026 outlook),” CIMB Research said.
Structural policies are also seen as key to sustaining medium-term growth, particularly through the Johor-Singapore Special Economic Zone (JS-SEZ), which CIMB Research described as “a key growth catalyst within Malaysia’s industrial policy –supported by the RTS Link completion and Singapore’s diversification drive”.
“The Finance Ministry views the JS-SEZ as a focal point for data centres, back-office relocations and high-value manufacturing.
“Policy support emphasises enhanced connectivity and government-to-government cooperation (such as rare earth initiatives led by Khazanah Nasional Bhd).”
Even with lingering global uncertainties – with “tariff shocks flagged by 48.3% of investors” – Malaysia’s active participation in high-end semiconductor supply chains and closer ties with the United States were cited as mitigating factors.
On fiscal management, CIMB Research underscored the government’s steady implementation of subsidy reforms.
“Subsidy rationalisation is being implemented in phases, targeted stages to enhance fiscal efficiency while cushioning inflationary pressures. The sequence includes chicken (November 2023), diesel (June 2024), eggs (August 2025) and RON95 (September 2025).”
CIMB Research added that these reforms could free up resources for social spending. “These reforms are expected to generate fiscal savings that can be channelled toward social spending including the STR + Sara cash transfer programme,” it pointed out.
The report also referenced remarks from Datuk Johan Mahmood Merican, Secretary General of Treasury, who outlined the Madani administration’s twin focus on consolidation and growth through “targeted subsidies, green tax planning and capital mobilisation via GLICs”.
Early progress has been encouraging.
“Hardcore poverty has declined from 0.2% in 2022 to 0.09% in 2024, with only 8,000 households remaining in this category, while unemployment stands at 3%, the lowest since the pandemic,” CIMB Research noted.
“The ringgit has appreciated to 4.23 (up 5.4% year-to-date), approved investments reached RM190.3bil in 1H25 (2024: RM384.4bil), and job creation stood at 65,138 (2024: 127,239),” it added.
The research firm highlighted continued commitment to fiscal discipline under the Fiscal Responsibility Act, citing the government’s “deficit reduction from 3.8% of gross domestic product in 2025 to 3.5% in 2026 and below 3% by 2030”.
It observed that public expenditure is projected at RM470bil in 2026 – a mildly expansionary yet disciplined stance – with greater reliance on GLIC and PPP funding for infrastructure.
Revenue diversification, it said, would be critical as petroleum-related income declines.
“Petroleum-related revenue is projected to decline from 16.9% (2025) to 12.5% (2026) of total revenue, offset by stronger sales and service tax collections (RM59.6bil) and e-invoicing enforcement to reduce leakages.”
CIMB Research also pointed to green tax initiatives, saying: “A carbon tax is planned for late-2026, initially covering the iron, steel and energy sectors, designed primarily as a behavioural tool – similar to the sugar tax – to incentivise low-carbon investments rather than to serve as a major revenue source.”
