BUDGET 2026 will reflect Putrajaya’s continued efforts to strengthen fiscal space and institutionalise reforms as part of its medium-term strategy to reduce debt and broaden the national tax base, MBSB Investment Bank Bhd (MBSB IB) said today.
In a research note issued ahead of the 10 October budget tabling, the bank forecast a modest increase in government spending to RM430 billion, up from RM421 billion under Budget 2025.
“We estimate the size of the fiscal deficit will decrease to RM78 billion in 2026, pushing down the deficit-to-GDP ratio to -3.6 per cent against a forecast of -3.8 per cent in 2025, assuming that economic growth remains moderate at 4.0 to 4.5 per cent,” it said.
Since 2021, Malaysia’s fiscal deficit has narrowed by more than two percentage points of GDP, allowing greater scope for counter-cyclical stimulus in the event of future economic downturns, the bank added.
MBSB IB anticipates that Budget 2026 will continue to focus on expanding the government’s revenue base, particularly through existing taxation mechanisms. This is in line with the Fiscal Responsibility Act, which aims to ensure sustainable budgeting.
“This strategy directly supports the fiscal objectives codified under the FRA. We think that the government may consider announcing a new tax or expanding current tax measures to increase revenue,” Bernama cited the bank saying.
Possible measures include higher personal income tax for top earners, a wider application of the sales and services tax (SST), expiry of import and excise duty exemptions for completely built-up (CBU) electric vehicles, and greater targeting of subsidies.
MBSB IB also noted the growing challenge of declining petroleum-related income. Although oil prices are projected to remain stable between US$65 and US$70 per barrel in 2026, the bank warned of downside risks due to global oversupply.
It further forecast a potential reduction in Petronas’ dividend to the federal government in 2026, down from RM32 billion estimated for both 2024 and 2025. Revenue-sharing negotiations with Sarawak and weaker global demand could further pressure Malaysia’s oil-linked fiscal income.
“Weaker global demand and tighter trade rules could continue to constrain the mining sector’s export outlook,” it said.
foodpanda Urges Effective Rollout of Gig Workers’ Bill
Meanwhile, on-demand delivery platform foodpanda has called for concrete measures in Budget 2026 to implement the upcoming Gig Workers’ Bill, describing it as a historic step towards securing protections for platform-based workers.
“Resilience also includes equipping people with the right skills,” said managing director Tan Ming Luk, who stressed the importance of institutional support to turn the legislation into real and lasting impact.
Tan cited foodpanda’s own Rider Entrepreneur Programme under the i-TEKAD initiative as an example of effective gig economy support and urged continued protection under the Social Security Organisation.
He also advocated for expanding Technical and Vocational Education and Training (TVET), financial literacy programmes, and entrepreneurship support tailored to gig workers.
“Additionally, delivery partners need practical support systems that safeguard their day-to-day resilience,” Bernama reported him saying while pointing to micro-financing for vehicle repairs and more affordable insurance options as examples.
Tan underscored the role of digitalisation in strengthening small vendors, noting that Budget 2026 should include micro-grants, tax deductions for digital tools, and simplified onboarding for traditional businesses.
“As Malaysia advances its digital and green economy agenda under the 13th Malaysia Plan, the gig sector must not be left behind,” he said.
He also called for enhancements to the P-Hailing Rahmah package, expanded safety initiatives such as pandasafe, and incentives for the adoption of electric motorcycles.
foodpanda, he added, remains hopeful that Budget 2026 will continue to offer business-friendly policies that drive innovation and inclusive economic growth. - October 3, 2025
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