Malaysia to Miss Fiscal Deficit Target for Second Year in a Row, BMI Predicts.

Malaysia is expected to miss its fiscal deficit target this year, with a projected budget gap of 4% of GDP, according to BMI. The deficit is likely to delay the government's goal of bringing it down to 3% by 2028. Revenue is forecast to decline to 16.4% of GDP in 2025, down from 16.8% in 2024, due to subdued economic activity and limited tax collection.

Malaysia is expected to miss its fiscal deficit target for 2025, with a projected budget gap of 4% of GDP, according to BMI [1]. This shortfall is likely to delay the government's goal of reducing the deficit to 3% by 2028. Revenue is forecast to decline to 16.4% of GDP in 2025, down from 16.8% in 2024, due to subdued economic activity and limited tax collection [1].

BMI predicts that economic growth will moderate to 4.2% in 2025, compared to the official forecast of 4.5% to 5.5% [1]. Petroleum-related revenue is also expected to undershoot the budget, adding to the fiscal strain. The government faces increasing pressure to further subsidize utility costs following a 14% increase in electricity tariffs that took effect on July 1 [1].

Bursa Malaysia's Q2 net profit is expected to be at the lower end of FY25 forecasts, according to CIMB [2]. This further highlights the financial challenges the country is facing.

The failure to meet the fiscal deficit target would be a setback for Malaysia, which currently holds the highest credit rating among developing nations in Southeast Asia. S&P Global Ratings warned that tariffs and trade wars have increased risks for Asia-Pacific sovereign ratings [1].

References:
[1] https://www.bloomberg.com/news/articles/2025-07-17/malaysia-to-miss-fiscal-deficit-target-this-year-bmi-says
[2] https://www.nst.com.my/business/corporate/2025/07/1245463/bursa-malaysia-s-q2-net-profit-seen-lower-end-fy25-forecasts-says