KUALA LUMPUR, 22 October 2025 — Malaysia remains committed to sustainable development and sound financial management. The fiscal deficit is projected to decrease to 3.5% of GDP in 2026, marking the fifth consecutive year of improvement. This progress keeps the nation on track to meet the fiscal targets outlined in the 13th Malaysia Plan.
These insights were among the highlights of Hong Leong Bank’s (HLB) post-budget roundtable, which gathered policymakers, economists, and business leaders to discuss the Budget’s economic implications for the private sector. The discussion is part of HLB’s ongoing series of client engagement sessions designed to provide strategic economic perspectives beyond traditional banking services.
Among the notable speakers were:
- Prof. Dr Ong Kian Ming, Adjunct Professor at Taylor’s University
- Datuk William Ng, National President of the Small and Medium Enterprises Association of Malaysia (SAMENTA)
- Ang Wei Liang, Tax Partner at PwC Malaysia
- Choong Yin Pheng, Economist, Fixed Income & Economic Research at HLB
Economic Outlook and Fiscal Discipline
HLB’s economic outlook aligns closely with government projections, maintaining a forecast for real GDP growth between 4.0% and 4.5% in 2026. Inflation is expected to remain moderate, averaging around 2.0%, while the Overnight Policy Rate (OPR) is anticipated to hold steady at 2.75% throughout the year.
In his opening remarks, Kevin Lam, Group Managing Director and CEO of HLB, commended the government’s focus on balancing growth with fiscal sustainability.
“The 2026 National Budget reflects continued discipline in strengthening Malaysia’s economic fundamentals through strategic revenue measures, expenditure rationalisation, and targeted subsidy reforms,” Lam stated. “These policies will help build long-term resilience and create a more stable environment for businesses and investors.”
Supporting Economic Transformation
Lam stressed that HLB is committed to supporting Malaysia’s economic transformation through private sector investment, SME development, digitalization, and sustainable financing. He highlighted potential areas for collaboration between the public and private sectors, including initiatives such as the Public-Private Partnership and the GEAR-uP program, which aim to stimulate domestic investment and job creation.
HLB anticipates that Malaysia’s economic trajectory in 2026 will remain stable, bolstered by steady domestic demand and disciplined fiscal management.
The government’s efforts to widen the revenue base, especially by enhancing the Sales and Service Tax (SST) and decreasing reliance on petroleum-related income, are expected to strengthen fiscal resilience.
Additionally, ongoing subsidy rationalisation is considered a step toward more effective social spending, allowing savings to be redirected to targeted assistance programs.
Ringgit Projection
From a currency perspective, HLB views the Budget as broadly positive for the ringgit, projecting a gradual strengthening to RM4.20 per USD by the end of 2025 and RM4.10 by 2026. This outlook is supported by sustained capital inflows, narrowing interest rate differentials with the United States, and the anticipated easing of U.S. monetary policy
