Malaysia's Subsidy and Social Aid Spending Surges 33.7% in Q1 2026

Malaysia experienced a significant 33.7% surge in spending on subsidies and social assistance during the first quarter of 2026. The increase is primarily attributed to the government's efforts to maintain subsidized fuel prices under the BUDI95 scheme, according to the ASEAN+3 Macroeconomic Research Office (AMRO).

The AMRO's Quarterly Fiscal Bulletin (QFB) highlights that rising global energy prices are beginning to impact subsidy expenditures, particularly in nations with extensive fuel subsidy programs. Both Indonesia and Malaysia saw notable increases in energy-related spending due to their comprehensive subsidy systems.

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Costs of energy and subsidies, along with the fiscal costs of recently introduced policy measures, are expected to weigh on the fiscal position.

While most ASEAN+3 economies saw positive spending growth, Indonesia, Malaysia, Singapore, Thailand, and Vietnam exhibited particularly strong expansion. AMRO noted that fiscal execution rates were higher in Indonesia and Thailand compared to the previous fiscal year, though slightly lower in Brunei, Korea, and Singapore.

Despite these pressures, AMRO reported that first-quarter revenues across the region remained robust, supported by strong income and consumption tax collections. However, revenue from resources declined for oil exporters, suggesting that the benefits of higher commodity prices have not yet been fully realized. AMRO anticipates that the fiscal impact of increased energy costs and subsidies will become more apparent in the second quarter's fiscal returns.

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The fiscal impact is expected to become more evident in the second quarter fiscal returns.