KUALA LUMPUR — April 12, 2018: The World Bank has raised its projection of Malaysia’s economy growth from an earlier 5.2 per cent to 5.4.
In its East Asia and Pacific Economic Update April 2018 edition, it said Malaysia’s growth was expected to remain strong in the near term, albeit at a more moderate pace compared to 2017.
In aggregate, Malaysia’s economic growth rate will be supported by the continued strength of private consumption.
With the anticipated decline in public investments, gross fixed capital formation will be driven mainly by the expansion of private sector capital expenditure, which is expected to be sustained by the continued flows of infrastructure projects and capital investments in manufacturing and services.
The strength of Malaysia’s export performance is expected to continue into the first half 2018 in tandem with the ongoing cyclical upturn in global trade, although at a lower rate than the preceding year.
The World Bank also said that the government remained committed to fiscal consolidation amid a continued expectation of the fiscal deficit target of 2.8 per cent of gross domestic product being achieved in 2018.
Malaysia’s social protection system will be strengthened with the introduction of the Employment Insurance Scheme last January which provides up to six months of income support, training, and job search assistance to retrenched workers.
Looking further ahead, Malaysia’s economy is projected to expand at 5.1 per cent in 2019 and 4.8 per cent in 2020 and is expected to achieve high-income country status between 2020 and 2024, said the World Bank.
The downside risks to Malaysia’s growth prospects, according to the report, were related mainly to the external environment.
In particular, an abrupt adjustment to global financial market conditions, or weaker-than-expected growth in the major economies and export demand could have disproportionately negative spillovers on Malaysia, given its high level of integration with the global economy and financial markets.
A strengthening economy, according to the World Bank, offers a crucial opportunity for Malaysia to accelerate structural reforms for sustained longer-term growth and to facilitate its transition towards the achievement of high-income country status in the coming years.
Concurrently, to achieve a near-balanced federal budget over the medium term would necessitate a deeper wave of reforms to enhance revenue collection and improve public sector efficiency, including the targeting efficiency of social protection programmes such as Bantuan Rakyat 1Malaysia.
Equally important is to reinforce measures to improve labour productivity and implement measures to ensure that growth is inclusive and will provide access to opportunities for all citizens. — Bernama