Prof Dr Yeah Kim LengCONSOLIDATION, compromise and comfort (3Cs) was the theme of the ISEAS Malaysia Studies Webinar held on the afternoon of Oct 24, which dissected Budget 2026.
As the fourth Madani administration budget and the first to kickstart the 13th Malaysia Plan for the 2026–2030 period, Budget 2026 is also notable for the volatile, uncertain, complex and ambiguous (VUCA) environment under which it was formulated.
The 3Cs aptly characterise a budget crafted in an increasingly challenging and complex world.
Following the most severe shock to the global economy since the Second World War, inflicted by the Covid-19 pandemic in 2020, most countries experienced unprecedented deficit spending and incurred massive debt increases over two to three years.
Countries with low debt levels pre-pandemic have become moderately indebted, whilst nations such as Malaysia, which had a moderate debt level before the pandemic, are now saddled with debt at levels considered vulnerable and potentially a drag on the economy if no action is taken.
Consolidation is therefore a necessary policy response, not only to avoid a fiscal crisis but also to increase government flexibility to spend and implement counter-cyclical measures in the event the fragile global economy takes a turn for the worse in 2026.
Consolidation, as opposed to an overly expansionary or loose fiscal policy, is thus crucial to preserve the “fiscal bullets” needed to counter an external demand or tariff-triggered shock to Malaysia, given its strong trade, investment and financial ties to the global economy.
A compromise, the second “C”, must also be struck, given that too rapid fiscal consolidation or over-tightening could curtail economic growth, leading not only to revenue shortfalls but also a reversal of improving fiscal metrics such as a narrowing fiscal deficit and a lower debt-to-GDP ratio.
This compromise in the fiscal stance regarding the appropriate size of government spending budgeted for 2026 is also necessary when considering the pace and magnitude of subsidy rationalisation, taxation, development allocations and incentives to spur growth, expand infrastructure, and concentrate efforts and resources on targeted sectors that yield maximum benefits to the economy and society.
The “comfort” delivered by Budget 2026 is evident in the direct cash transfers, fuel, food and transport subsidies, and various other social spending measures aimed at alleviating economic hardship, especially among the poor and disadvantaged. Additionally, there were no tax increases and no new taxes introduced, which should provide some comfort to the upper and middle classes, as well as profitable firms and business owners.
Overall, society at large—including domestic and foreign investors and entrepreneurs—can take reassurance that the balanced budget, with its strong emphasis on governance, integrity and service delivery, reflected in part by the promulgation of the Government Procurement Act and other policy changes to enhance spending efficiency and curb leakages and wastage, will be able to maintain the economy’s current growth trajectory.
To the 3Cs, we could add a fourth—consistency—in policies encompassing the Madani Economy Framework, New Industrial Master Plan, New Energy Transition Roadmap, 13th Malaysia Plan and various other sectoral blueprints and roadmaps, as reflected in the implementation of the various Budget 2026 strategies and measures.
With the country’s economic direction clearly set, there are hopeful signs that, with political and policy stability, successful completion will constitute a fitting fifth “C”.
