Affin Hwang IB analysts Nur Farah 'Ain Binti Zakaria and Vincent Loo Yeong Hong said in a report that the Malaysian government's fiscal deficit target of 3.5% of GDP in 2026 is expected to be achieved with the support of falling international oil prices, lower fuel subsidy costs than expected, and Petronas' strong dividend payment capacity. Due to high global crude oil prices, fuel subsidy spending is expected to reach 36 billion to 40 billion ringgit this year, significantly exceeding the 15 billion ringgit allocated in the 2026 budget. They said that falling oil prices in the second half of the year, Petronas' potential special dividend, stronger tax revenue from structural reforms, and stricter administrative expenses are expected to offset the impact of higher subsidy bills. They added that even if the deficit temporarily widens to 3.7% to 3.8% of GDP, these factors should enable Malaysia's fiscal consolidation to progress steadily.

Affin Hwang IB analysts Nur Farah 'Ain Binti Zakaria and Vincent Loo Yeong Hong said in a report that the Malaysian government's fiscal deficit target of 3.5% of GDP in 2026 is expected to be achieved with the support of falling international oil prices, lower fuel subsidy costs than expected, and Petronas' strong dividend payment capacity. Due to high global crude oil prices, fuel subsidy spending is expected to reach 36 billion to 40 billion ringgit this year, significantly exceeding the 15 billion ringgit allocated in the 2026 budget. They said that falling oil prices in the second half of the year, Petronas' potential special dividend, stronger tax revenue from structural reforms, and stricter administrative expenses are expected to offset the impact of higher subsidy bills. They added that even if the deficit temporarily widens to 3.7% to 3.8% of GDP, these factors should enable Malaysia's fiscal consolidation to progress steadily.