Hong Leong Bank: National Budget 2026 Balances Malaysia’s Fiscal Strength and Sustainable Growth Path
Hong Leong Bank: National Budget 2026 Balances Malaysia’s Fiscal Strength and Sustainable Growth Path
Dafinah Ahmed Hilmi, CEO of Hong Leong Islamic Bank [first from left] moderating a panel session with Ang Wei Liang, Tax Partner from PwC Malaysia [2nd from left], Choong Yin Pheng, HLB’s Economist for Fixed Income & Economic Research [center], Datuk William Ng, National President of SAMENTA [2nd from right], and Prof. Dr. Ong Kian Ming, Adjunct Professor at Taylor’s University [first from right] at HLB’s post-budget roundtable.
KUALA LUMPUR, 22 October 2025 — Malaysia’s National Budget 2026 strikes a balance between fiscal discipline and economic growth, reflecting the government’s leadership in growing the economy through robust governance and targeted strategies, while maintaining momentum for domestic expansion. Specifically, Malaysia’s fiscal consolidation remains firmly on track, with the deficit projected to narrow to 3.5% of GDP in 2026, marking the fifth consecutive year of improvement and moving the nation closer to the targets outlined in the 13th Malaysia Plan.
These were among some of the key takeaways from Hong Leong Bank’s (“HLB” or “the Bank”) recent post-budget roundtable, which gathered policymakers, industry leaders, and economic experts to discuss the implications of Budget 2026 on Malaysia’s macroeconomic outlook and business landscape. Aligned with its commitment to going beyond banking and being a value-adding partner to its customers, this is part of HLB’s ongoing series of customer engagement and financial advisory offerings, where the Bank provides customers with industry insights and economic outlooks.
HLB’s roundtable also featured insights from Prof. Dr. Ong Kian Ming, Pro Vice-Chancellor for External Engagement at Taylor’s University, Datuk William Ng, National President of the Small and Medium Enterprises Association of Malaysia (“SAMENTA”), Mr. Ang Wei Liang, Tax Partner at PwC Malaysia, and Ms Choong Yin Pheng, General Manager of Fixed Income & Economic Research at HLB.
The roundtable event revealed that HLB’s house view for real GDP growth of 4.0-4.5% for 2026 aligns with the government’s forecast. The Bank also expects inflation to remain manageable, averaging around 2.0%, and anticipates the Overnight Policy Rate (“OPR”) to remain at 2.75% through 2026.
In his opening remarks, Kevin Lam, HLB’s Group Managing Director and CEO commended the government’s commitment to sound fiscal management and growth-oriented reforms.
“The 2026 National Budget reflects the government’s continued discipline in balancing growth with fiscal sustainability. We are encouraged by the focus on strengthening Malaysia’s economic foundation through strategic revenue measures, expenditure rationalisation, and targeted subsidy reforms. These steps support the nation’s long-term resilience but also create a more stable environment for businesses and investors.
HLB remains deeply committed to supporting the country’s economic transformation and will continue to play an active role in enabling this growth, from facilitating private sector investment, advancing digitalisation to supporting the SME ecosystem and promoting sustainable growth across industries. We see strong potential for collaboration between the public and private sectors, particularly through initiatives like the Public-Private Partnership and GEAR-uP programme, which can accelerate domestic investment and job creation.”
HLB expects Malaysia’s economic trajectory in 2026 to remain stable, anchored by steady domestic growth and disciplined fiscal management. The government’s continued focus on expanding the revenue base, particularly through enhancements to the Sales and Service Tax (“SST”) framework and reducing reliance on petroleum-related income, underscores a more sustainable fiscal position.
At the same time, the Bank notes positive progress in subsidy reform, which continues to rationalise spending while redirecting savings towards more targeted social assistance programmes.
From a macro perspective, the Bank views the 2026 Budget as mildly positive for the Ringgit. HLB projects the MYR to strengthen gradually towards 4.20 by the end of this year and 4.10 by 2026 against the USD, supported by decent domestic growth, manageable inflation, narrowing interest rate differentials with the United States, and sustained capital inflows. The Federal Reserve’s easing cycle and Bank Negara Malaysia’s steady policy stance are also expected to provide continued support for the Ringgit in the near term.