PETALING JAYA: While there is no mega announcement to herald a major expansion to the construction sector, analysts believe that Budget 2026 will bring about meaningful continuity to the industry which supports steady earnings visibility, although it does not mark a new boom.
The Madani government has allocated a total of RM81bil for development expenditure (DE) under the latest budget, with Sabah and Sarawak notably receiving RM6.9bil and RM6bil, respectively, in addition to a special grant rate which has been doubled to RM600mil.
In his tabling of the budget yesterday, Prime Minister Datuk Seri Anwar Ibrahim reported that highway projects in Sabah and Sarawak amounted to costs exceeding RM48bil.
Also notable are the RM2.5bil allotment for the maintenance of federal roads, RM2.2bil for 43 flood mitigation projects (RTB or Rancangan Tebatan Banjir) including 12 new ones such as RTB Sungai Mengkibol (Kluang), RTB Sungai Lenggeng (Seremban), RTB Sungai Buaya (Kuala Nerus), as well as a RM3.3bil allocation for rural basic infrastructure such as roads, water, electricity, bridges and lighting.
Head of equity sales and seasoned analyst at Rakuten Trade Vincent Lau is of the view that while the government is keeping a prudent strategy with the absence of new mega project announcements, it is nonetheless crucial to keep the current ones ongoing, such as the Mass Rapid Transit (MRT) 3, the Mutiara Line Light Rail Transit (LRT) and the Sabah and Sarawak highways.
“The government can always choose to announce new projects later, but right now, they are doing well maintaining the narrowing trend of the fiscal deficit, expected to be 3.8% of gross domestic product (GDP) this year and 3.5% in 2026,” he said.
Maintaining that the Madani administration is focused on a people-friendly budget, he said it is essential that the government keeps a strict balance between consolidating its coffers, while ensuring aid can still be transferred to the public and allowing confirmed mega projects to go ahead unimpeded.
While Budget 2026 has set yet another record of being the largest budget to date at RM470bil, compared to the RM452bil set aside last year, Lau believes the general tone is that the latest budget has come in within expectations.
“While some could be concerned, especially with the government providing blanket financial subsidies to all Malaysians, the fact that the fiscal deficit is continuing to decline is one evidence that the Madani strategy is heading in the right direction,” he said.
Meanwhile, a spokesperson for a major construction firm sees the RM48bil allocation to Sabah and Sarawak infrastructure as a significant and material multi-year pipeline that should lift activity for civil works, earthworks, roads, bridges and utilities in Sabah and Sarawak over the next three to five years.
On the other hand, he observes that the focus on federal and state-level maintenance works would favour G1 to G4 and regional mid-tier contractors, potentially improving utilisation and margins if procurement is timely and payment practices are reliable.
In context, under Malaysia’s Construction Industry Development Board (CIDB) licensing system, G1 contractors can take projects up to RM200,000 while the G4 class would be able to take on jobs worth up to RM3mil.
The spokesperson explained: “Budget 2026 provides RM2.5bil for federal road maintenance and RM5.6bil via the Malaysian Road Records Information System (MARRIS) to states for road upkeep; there’s also specific ringfencing and district-level budgets for quick fixes that suit smaller outfits.”
He pointed out that these works have lower capital expenditure, quicker to award, and can boost margins if competition is limited and overheads are controlled, although delivery risks remain without stronger joint-venture frameworks and oversight.
In addition, the spokesperson concurred with Lau in highlighting that the government should be able to sustain multi-billion ringgit infrastructure commitments while adhering to its fiscal targets.
“We believe Budget 2026 shows a fiscal consolidation path and prioritises targeted spending plus use of government-linked investment companies (GLICs), federal agencies and public-private partnerships to leverage resources.
“The government is projecting total large sums committed, but the Prime Minister’s speech appears to emphasise fiscal discipline, with fiscal deficit targeted to fall to about 3.5% in 2026,” he noted.
President at the Master Builders Association Malaysia (MBAM) Oliver Wee said in a statement that Budget 2026 plays a crucial role in providing critical infrastructure works while laying the groundwork for sustainable growth and infrastructure development.
He said the latest budget prioritises key infrastructure projects and underscores the critical role of the construction sector in driving Malaysia’s socio-economic development particularly in transportation and housing.
However, with the focus ostensibly shifting towards Sabah and Sarawak, Wee hopes there will be more projects allocated for Peninsular Malaysia moving forward.
More importantly however, he is imploring the government to only apply the new Sales and Services Tax (SST) on contracts executed after Jan 1, 2026, in the view that the industry is continuing to face significant challenges from volatile building material prices and a persistent increase in cost of doing business.
“This would provide the industry with a crucial transition period and prevent disruption to ongoing projects, which is vital for maintaining project stability and managing cash flow,” Wee said.
To enhance productivity, he suggested that the government introduce grants and tax relief to lower the high upfront cost of adopting modern technologies like the Industrialised Building System (IBS) and Building Information Modelling (BIM).
Wee said incentivising green building materials will also align the sector with Malaysia’s sustainability goals and a predictable project flow allows industry players to invest in capacity and skills with confidence.
