Malaysia is expected to do well next year, continuing its good performance in 2017 that has seen a higher-than-expected GDP growth in the first three quarters of the year, according to the findings of an International Monetary Fund (IMF) team that visited the Southeast Asian country.
The Malaysian economy has shown resilience in recent years and continues to perform well, said IMF team leader Nada Choueiri in a statement. “Real GDP growth has surprised on the upside, growing at 5.9 percent year-over-year in the first three quarters of 2017.”
For the year as a whole, growth is projected at 5.5% to 6.0%, still driven by domestic demand and robust exports. On the external side, the current account balance surplus has increased, helped by strong exports.
Real GDP growth is projected at 5.0% to 5.5% in 2018. While the cyclical upturn will begin to normalize, momentum in activity is expected to remain strong in the first half of the year, supported by domestic demand and continued strength in global trade, said the statement.
Risks to the near-term outlook are balanced. Strong global demand for electronics, which has benefited Malaysia’s exports, could last longer than anticipated, while downside risks include policy uncertainty in advanced economies and tighter global financial conditions.
“Going forward, striking the right balance in policies will be key,” said Choueiri. “The government’s planned pace of fiscal consolidation for 2017-18 is appropriate, and will help build buffers and maintain financial market confidence.”
In the medium term, she continued, fiscal policy should follow a gradual consolidation path, and the composition of adjustment could be improved to make it more revenue based and to make room for the structural reforms and increased social spending for inclusive growth. Medium-term fiscal targets should be better communicated.
“The authorities’ comprehensive structural reform agenda, laid out in the 11th Malaysia plan, focuses on supporting higher productivity and improving labor market outcomes, which would help boost medium-term growth and improve living standards.”
Choueiri said priority should be given to policies that encourage female labor force participation; improve the quality of education and skills; improve vocational and technical training to reduce labor market skill mismatches; encourage R&D; and update public infrastructure.
Photo: naim fadil
