Last updated on October 11, 2025
KUALA LUMPUR, 10 October 2026 — Malaysia has unveiled its most forward-looking national budget to date, aimed at propelling the nation toward sustainable, innovation-led growth. Under Prime Minister Datuk Seri Anwar Ibrahim’s leadership, Budget 2026 delivers record allocations to strengthen SMEs, accelerate AI adoption, and attract high-value investments, all while reinforcing Malaysia’s commitment to green transformation and inclusive prosperity.
In his budget speech, Prime Minister Anwar delivered a message that was both pragmatic and forward-looking: Malaysia’s economic future will be built not only on fiscal discipline and industrial transformation but also on a renewed commitment to inclusivity and innovation.
The RM404 billion national budget, the largest in the nation’s history, outlines a strategic plan to accelerate growth while ensuring the benefits of development reach small businesses and the wider rakyat.
“Malaysia’s growth must be broad-based, empowering enterprises of all sizes to compete in an evolving digital and regional economy,” Anwar said. “Our focus is on catalysing investment, driving technological adoption, and creating meaningful employment across every sector.”
At its core, Budget 2026 seeks to position Malaysia as a competitive, resilient, and digitally capable economy, anchored by three major priorities: stimulating private investment, empowering micro, small and medium enterprises (MSMEs), and advancing sustainable industrial transformation.
Empowering the Backbone of the Economy
MSMEs continue to form the backbone of Malaysia’s economy, contributing nearly half of GDP and employing over seven million people. Recognising the sector’s vital role, the government has allocated RM15 billion in financing facilities and targeted incentives to help small businesses modernise, digitise, and expand beyond domestic markets.
Among the key measures is the continuation of the SME Digitisation Grant under Bank Negara Malaysia, which will now include artificial intelligence (AI) tools and cybersecurity solutions as eligible categories.
The SME Automation and Digital Transformation Scheme, managed through the SME Bank and MIDF, has been expanded to RM1.5 billion, aimed at encouraging automation in manufacturing, logistics, and services.
To enhance liquidity, the Business Financing Guarantee Scheme (BFGS) has been raised to RM30 billion, offering guarantees of up to 90% for SMEs seeking expansion capital. The government has also pledged to expedite payments to suppliers under government contracts, a long-standing request from small contractors and vendors.
“These measures are about restoring confidence and enabling businesses to reinvest in growth,” Anwar noted. “We are ensuring that no viable enterprise is held back by a lack of access to funding or technology.”
Driving Investment and Industrial Renaissance
In line with Malaysia’s broader Industrial Renaissance agenda, Budget 2026 reinforces the nation’s position as an attractive hub for advanced manufacturing and regional trade. The government will establish a National Investment Accelerator Fund (NIAF) worth RM5 billion to support strategic sectors such as semiconductors, renewable energy, and digital infrastructure.
Foreign investors entering high-value industries will benefit from enhanced tax incentives—including up to 10 years of corporate tax exemption for companies investing in green technology, electric vehicle (EV) production, and high-end data centres. The budget also outlines incentives for multinational corporations to collaborate with local SMEs through technology transfer programmes, strengthening domestic supply chains.
Meanwhile, a Special Economic Zone (SEZ) in Johor has been earmarked for high-tech investments, particularly from Singapore and other ASEAN partners, with priority given to logistics, AI-driven manufacturing, and renewable energy projects.
Anwar emphasised that foreign investment must be accompanied by local participation.
“Our ambition is not just to attract investors, but to build capabilities and opportunities for Malaysians,” he said. “Industrial progress must uplift our SMEs and our workforce together.”
Harnessing AI and Digital Transformation
A notable highlight of Budget 2026 is Malaysia’s intensified focus on artificial intelligence as a national growth engine. The government has allocated RM1.2 billion under the National AI Roadmap to boost AI integration across manufacturing, education, and public services. Part of this includes establishing AI Talent Academies in collaboration with local universities and tech firms to train 100,000 Malaysians in digital and data-driven skills by 2030.
To ensure widespread adoption, the Digitalisation Matching Grant will now support the use of AI-enabled productivity platforms, cloud-based ERP systems, and data analytics solutions for SMEs. A new AI in Agriculture Initiative, worth RM200 million, aims to improve crop yields and resource management among small farmers through precision technology.
According to Anwar, digital transformation must serve both innovation and inclusion.
Building a Sustainable Future
Sustainability remains another key pillar of Budget 2026. The government will expand its Green Investment Tax Allowance (GITA) and Green Income Tax Exemption (GITE) schemes until 2030, incentivising businesses to adopt renewable energy and carbon-reduction initiatives. RM2 billion will be allocated under the Green Technology Financing Scheme (GTFS) to support eco-friendly projects in transport, energy, and waste management.
For the logistics and transport sector, RM500 million has been set aside to accelerate EV infrastructure development, including charging networks across major highways and urban centres. These measures aim to support Malaysia’s target of achieving net-zero carbon emissions by 2050.
A Balanced and Inclusive Growth Path
Budget 2026’s measures signal a broader rebalancing of Malaysia’s growth model—one that combines fiscal responsibility with strategic investment in technology, human capital, and sustainability. While the budget targets 4.5% GDP growth, it is designed to foster long-term competitiveness rather than short-term stimulus.
Analysts have noted that the government’s approach reflects a maturing policy direction—shifting from subsidy-heavy interventions to performance-based incentives that reward innovation and productivity.
In Anwar’s own words:
“Our mission is not only to grow the economy but also to future-proof it. Malaysia’s strength will lie not in how fast we grow, but in how fairly and sustainably that growth is shared.”
As Malaysia enters a new phase of digital and industrial transformation, Budget 2026 sets the tone for a smarter, greener, and more inclusive economy: one built on the shared prosperity of businesses, workers, and communities alike.
