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PETALING JAYA: Malaysia’s latest reforms and relief measures outlined by Prime Minister Datuk Seri Anwar Ibrahim in his New Year message are expected to support business sentiment, consumer spending and economic growth in 2026, economists and analysts say, even as global uncertainties remain elevated.
Economists said the mix of institutional reforms, cash assistance and business-focused measures signals a shift from crisis management to execution.
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While broadly in line with expectations, economist Geoffrey Williams said the announcements are welcome, nonetheless.
He said the measures reinforce the sense that the administration is gaining momentum on reforms, moving beyond “survival mode”, which should help strengthen consumer, business and investment confidence.
“The real message is that Anwar is in charge and the policy direction is clear, strong and stable,” he told StarBiz.
Williams said the governance reforms, in particular, could help ease growing frustration among civil society groups that had criticised the “lack of reforms”.
He added that the reforms are being introduced against a relatively supportive macroeconomic backdrop.
“The economic environment is stable, with strong growth, low inflation and robust foreign direct investment. That sets the scene for meaningful reforms in 2026,” he said, adding that the focus appears to be on two key groups – households and micro, small and medium enterprises (MSMEs).
Similarly, economist professor Yeah Kim Leng said the announcements and reform measures “indirectly” contribute to political stability.
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Yeah said fiscal reforms over the last two years have helped reinforce confidence in the administration and investor sentiment, while measures to improve spending efficiency, reduce waste and curb corruption would lift economic efficiency over the longer term.
“These reforms help fulfil the reform agenda, especially legislative reforms, and indirectly contribute towards political stability, trust and confidence in the present administration,” he said.
“In the short term, these reforms help calm negative sentiment among investors.
“Then in the longer term, especially if the reforms result in strengthening governance and improving the government delivery system, enhancing efficiency, those will really provide a kind of a push to the economy in direct terms.”
He believes Malaysia’s growth momentum remains intact heading into 2026, even as global risks continue to rise.
“Despite rising global turbulence, including the impact of US tariffs, growth momentum picked up in the second half of last year and is carrying through,” he said.
However, under such conditions, Yeah stressed that continued support for businesses, particularly MSMEs, is crucial.
“Reducing regulatory burdens and the cost of doing business is very important, especially for MSMEs that are facing rising compliance and operating costs,” he said, adding that measures such as the deferment of e-invoicing and adjustments to the service tax help alleviate pressures.
On the household side, he also noted that the cash aid would provide an immediate boost to domestic demand.
“More importantly, employment, wage and income growth is still running ahead of inflation, which suggests domestic demand will remain supportive of growth,” he said.
Meanwhile, CIMB Research noted that Anwar outlined “a reform-led and pro-growth agenda focused on governance, execution and near-term economic support”.
The research house said the planned tabling of four institutional reform bills when Parliament reconvenes on Jan 19 should help address “governance weaknesses and is supportive of overall market sentiment”.
These include a Bill to impose a 10-year term limit on the Prime Minister and senior civil service positions, the tabling of an Ombudsman Bill to handle public complaints over government misconduct, a Freedom of Information Bill to improve transparency in public procurement and government decisions, and a Bill to separate the powers of the attorney general and the public prosecutor.
CIMB Research added that tax relief and compliance-easing measures for SMEs are expected to reduce operating costs.
These include a one-year deferment of mandatory e-invoicing to next year for companies with annual sales of between RM1mil and RM5mil, an increase in the service tax exemption threshold on rental to cover MSMEs with annual sales of up to RM1.5mil from RM1mil previously, as well as a reduction in the service tax on rental for existing SMEs to 6% from 8%, which is expected to cost the government nearly RM500mil annually.
For specific sectors, CIMB Research said the reduction in the service tax on rental from 8% to 6% for SMEs is mildly positive for real estate investment trusts, as it lowers their effective tax burden.
Meanwhile, the government may also relax import conditions to keep construction material costs low.
CIMB Research said this could help construction companies, given the potential margin support but may weigh on building materials producers.
Additionally, the research outfit also said continued targeted cost-of-living assistance should support consumer spending and the overall consumer sector.
This includes monthly payments of up to RM200 under the Sumbangan Asas Rahmah (SARA) programme starting Jan 9, the first phase of Rahmah Cash Assistance (STR) of up to RM500 from Jan 20, and a RM100 SARA payment for every Malaysian aged 18 and above on Feb 9.
The government will also expand the Jualan Rahmah Madani initiative, with thousands of nationwide events offering essential goods at discounted prices.
The Finance Ministry said the 2026 monthly SARA programme will cover 8.1 million recipients with an allocation of RM8bil, up from 5.4 million recipients and RM5bil in 2025.
Nearly all of last year’s monthly SARA aid was spent by recipients, while the SARA untuk Semua programme reached 21.2 million people, or 96% of eligible Malaysians, totalling nearly RM2.1bil.
The STR allocation will provide RM1.1bil to 3.7 million households and 1.3 million senior citizens without spouses, with payments ranging from RM100 to RM500 depending on eligibility.
Anwar also confirmed the second phase of salary adjustments for civil servants under the Public Service Remuneration System (SSPA) in January 2026.
The Implementation and Management & Professional Group (P&P) will get a 7% increase, while the Top Management Group (KPT) will get 3%, following the first phase in December 2024 when P&P and KPT received 8% and 4% respectively.
Judges’ salaries will also be raised after 10 years without an increase, with total adjustments expected to cost RM18bil.
Overall, CIMB Research said it is “positive” on the New Year message and expects the FBM KLCI to end 2026 at 1,772 points.
