Malaysia on course to become high-income nation

Malaysia is set to become a high-income nation by 2020 thanks to skillful economic management despite an uneven global recovery, according the International Monetary Fund (IMF).

“Robust domestic demand supported by sound macro-financial policies is driving strong, non-inflationary growth in the face of uncertain external conditions and declining commodity prices,” it said.

The fund also lauded the government for carrying out ambitious fiscal reforms by capitalising on the country’s full employment, falling energy prices and low inflation rate.

“These reforms will have far-reaching and long-lasting benefits, helping to diversify Malaysia’s revenue system away from oil and gas and raising the efficiency and equity of public spending,” said a report published by the IMF mission in Malaysia, which is helmed by Alex Mourmouras.

However, the path to becoming a high-income nation is not without risks, such as weaker fuel and commodity prices, along with slower growth recovery in emerging markets and advanced economies.

“The impact of lower global oil and gas prices on Malaysia could be larger, dampening growth through delayed investment plans and the impact of higher real interest rates while the current account surplus could narrow.”

Moreover, IMF warned that financial vulnerabilities remain in light of the country’s high property prices and elevated household debt.

Thus, it is urging the authorities to continuously implement the structural reforms under the 11th Malaysia Plan in order to promote innovation, quality education and female workforce participation as well as address youth unemployment. They should also maintain the reform momentum so that the government’s finances will become sustainable by 2020.

Although Malaysia’s economic growth could moderate to 4.8 percent this year, this rate is still considered healthy and would be driven by private investments of companies outside the oil and gas sector, it added.