KUALA LUMPUR: Malaysia will likely not meet its fiscal deficit targets for 2026 as the Iran war drives up the cost of fuel subsidies, Second Finance Minister Datuk Seri Amir Hamzah Azizan says, adding that longer-term goals remain intact.
“If I end up at the end of the day, slightly short of the targets, it’s okay,” Amir said in an interview with Bloomberg TV’s Haslinda Amin on Tuesday, underscoring that the government’s priority right now is to protect vulnerable groups.
However, Amir said the government remains determined to achieve its medium-term goal of bringing the fiscal deficit to below 3% of gross domestic product by 2028.
That shortfall stood at 5.5% when Prime Minister Datuk Seri Anwar Ibrahim came to power in late 2022.
Malaysia and other South-East Asian nations like Singapore are bracing for a more pronounced impact from the Iran conflict in the third quarter, as disruptions to global energy markets increasingly filter through to the local economy.
The effects are already beginning to be felt in Malaysia, with inflation accelerating to 1.9% in April, the fastest pace since October 2024.
Industries including aviation and agriculture are also getting hit.
The government has sheltered the population from some of the impact of the war by maintaining fuel subsidies.
The most popular petrol, known as RON95, remains unchanged at RM1.99 per liter, one of the lowest levels in the world.
Still, it has reduced the amount of subsidised RON95 that individuals can buy since April.
Amir revealed that Malaysia’s fuel subsidy bill in May fell to RM3.5bil from a high of RM7.5bil in April, which was ten times its pre-war expenditure. — Bloomberg
