The Tamesis
January 7, 2026
Petaling Jaya – While global uncertainty remains high, Malaysia’s latest reforms and relief measures outlined by Prime Minister Datuk Seri Anwar Ibrahim in his New Year’s address are expected to support business confidence, consumer spending and economic growth in 2026, economists and analysts said.
Economists say the combination of institutional reforms, cash aid and business-focused measures marks a shift from crisis management to execution.
Economist Jeffrey Williams said the announcements were welcome, although broadly in line with expectations.
He said the measures reinforced a sense that the government was accelerating reforms and moving beyond “survival mode”, which should help boost consumer, business and investment confidence.
“The real message is that Anwar is in power and the policy direction is clear, strong and stable,” he told StarBiz.
Williams said governance reforms in particular could help alleviate growing frustration among civil society groups who criticize the “lack of reform”.
He added that the reforms were launched against a relatively favorable macroeconomic backdrop.
“The economic environment is stable, with strong growth, low inflation and strong foreign direct investment. This sets the stage for meaningful reforms in 2026,” he said, adding that the focus appeared to be on two key groups – households and micro, small and medium enterprises (MSMEs).
Likewise, economist professor Yeah Kim Leng said the announcements and reform measures “indirectly” contribute to political stability.
Yes, fiscal reforms over the past two years have helped bolster confidence in government and investor sentiment, while measures to improve spending efficiency, reduce waste and curb corruption will improve economic efficiency in the long term.
“These reforms contribute to the achievement of the reform agenda, particularly legislative reform, and indirectly contribute to political stability, trust and confidence in this government,” he said.
“In the short term, these reforms will help calm negative investor sentiment.
“In the long term, especially if reforms can strengthen governance, improve government delivery systems and improve efficiency, those will be a real direct boost to the economy.”
He believes Malaysia’s growth momentum remains intact heading into 2026, despite rising global risks.
“Despite increased global turmoil, including the impact of U.S. tariffs, growth momentum picked up in the second half of last year and is continuing,” he said.
However, in this case, Yeah stressed that it is crucial to continue supporting businesses, especially small, medium and micro enterprises.
“It is important to reduce the regulatory burden and operating costs, especially for MSMEs that are facing rising compliance and operating costs,” he said, adding that measures such as deferring e-invoicing and adjusting service tax can help ease the pressure.
On the household front, he also noted that cash assistance would immediately boost domestic demand.
“More importantly, employment, wage and income growth remain ahead of inflation, suggesting domestic demand will continue to support growth,” he said.
CIMB Research, meanwhile, noted that Anwar outlined a “reform-led, pro-growth agenda focused on governance, execution and near-term economic support”.
The research house said it plans to introduce four institutional reform bills when parliament resumes on January 19, which should help address “governance weaknesses and support overall market sentiment.”
These include bills to introduce ten-year term limits for prime minister and senior civil service positions, a bill to introduce an ombudsman to deal with public complaints about government misconduct, a freedom of information bill to increase transparency in public procurement and government decision-making, and a bill to separate the powers of the attorney general and prosecutors.
CIMB Research added that tax relief and compliance easing measures for SMEs are expected to reduce operating costs.
The measures include deferring mandatory e-invoicing by one year to next year for companies with annual sales between RM1 million and RM5 million, raising the rental service tax exemption threshold from the previous RM1 million to micro, small and medium enterprises with annual sales not exceeding RM1.5 million, and reducing the rental service tax for existing small and medium enterprises from 8% to 6%, which is expected to cost the government nearly RM500 million annually.
For specific sectors, CIMB Research said reducing the rental service tax for SMEs from 8% to 6% would be mildly positive for REITs as it reduces their effective tax burden.
At the same time, the government may also relax import conditions to keep the cost of construction materials low.
CIMB Research said this could help construction companies given the potential profit support, but could put pressure on building materials producers.
Additionally, the research house said continued targeted cost-of-living assistance should support consumer spending and the overall consumption sector.
This includes monthly payments of up to RM200 under the Sumbangan Asas Rahmah (SARA) scheme starting from January 9, payments of up to RM500 under the first phase of Rahmah Cash Assistance (STR) from January 20, and SARA payments of RM100 for every Malaysian aged 18 and above starting from February 9.
The government will also expand the Jualan Rahmah Madani program to host thousands of events across the country to provide essential goods at discounted prices.
The Finance Ministry said the monthly SARA program will cover 8.1 million recipients and allocate RM8 billion in 2026, up from 5.4 million recipients and RM5 billion in 2025.
Last year’s SARA monthly aid was almost entirely spent by recipients, while the SARA untuk Semua program benefited 21.2 million people, or 96% of eligible Malaysians, totaling nearly RM2.1 billion.
The STR allocation will provide RM1.1 billion to 3.7 million families and 1.3 million senior citizens without spouses, with payments ranging from RM100 to RM500 depending on eligibility.
Anwar also confirmed that the second phase of salary adjustments for civil servants will be carried out in January 2026 under the Public Service Pay System (SSPA).
Following the first phase in December 2024, when P&P and KPT received 8% and 4% respectively, the Implementation and Management and Professional Team (P&P) will receive a 7% increase, while the Senior Management Team (KPT) will receive 3%.
Judges’ salaries will also be increased after 10 years without an increase, with the total adjustment expected to cost RM18 billion.
Overall, CIMB Research said it is “positive” on the New Year message and expects the FBM KLCI to end 2026 at 1,772 points.
