Overview

  • Last updated: April 2017

    Malaysia is a highly open, upper-middle income economy. Malaysia was one of 13 countries identified by the Commission on Growth and Development in its Growth Report to have recorded average growth of more than 7 percent per year for 25 years or more. Economic growth was inclusive, as Malaysia also succeeded in nearly eradicating poverty.

    From an economy dominated by the production of raw natural resource materials, such as tin and rubber, even as recently as the 1970s, Malaysia today has a diversified economy and has become a leading exporter of electrical appliances, electronic parts and components, palm oil, and natural gas. After the Asian financial crisis of 1997-1998, Malaysia continued to post solid growth rates, averaging 5.5 percent per year from 2000-2008. Malaysia was hit by the Global Financial Crisis in 2009 but recovered rapidly, posting growth rates averaging 5.7 percent since 2010.

    Less than 1 percent of Malaysian households live in extreme poverty, and the government’s focus has shifted toward addressing the well-being of the poorest 40 percent of the population (“the bottom 40”). This low-income group remains particularly vulnerable to economic shocks as well as increases in the cost of living and mounting financial obligations. Income inequality in Malaysia remains high relative to other East Asian countries, but is gradually declining. For example, from 2009 to 2014 the real average household incomes of the bottom 40 grew at 11.9 percent per year, compared to 7.9 percent for the total population of Malaysia, thus narrowing income disparities. Following the removal of broad-based subsidies, the government has gradually moved toward more targeted measures to support the poor and vulnerable, mainly in the form of cash transfers to low-income households.

    Malaysia’s near-term economic outlook remains broadly favorable, reflecting a well-diversified economy, despite some risks. Domestic demand is expected to continue to anchor economic growth, supported by continued income growth and stable labor market, while expected improvement in global trade would contribute positively to the external sector. The government have implemented a series of reforms and remains committed to fiscal consolidation, with the fiscal deficit target set at 3 percent of GDP for 2017. Going forward, fiscal consolidation may require a second wave of reforms in the public sector as the scope for further reducing operating expenditures narrows and collection from goods and services tax (GST) plateaus. The government may consider additional reforms to raise revenue and improve public sector efficiency. Going forward should external conditions worsen, improvements in the efficiency of social assistance programs, including a shift toward more targeted social policies, could provide immediate support to vulnerable households. Accelerating structural reforms to enhance public sector performance and boost the productivity of public spending will be vital to sustain robust growth in an adverse external environment.

    While significant, Malaysia’s productivity growth over the past 25 years has been below those in several global and regional comparators. As factor accumulation is expected to slow, accelerating productivity growth is the main path for Malaysia to achieve convergence with high-income economies. Accelerated implementation of productivity-enhancing reforms to increase the quality of human capital and create more competition in the economy will be key for Malaysia to secure a lasting place among the ranks of high-income economies. 

  • Last updated: April 2017

    The World Bank Group’s current partnership with Malaysia is focused on knowledge-sharing. It is centered on support for Malaysia’s vision to join the ranks of high income economies by 2020 through inclusive and sustainable growth, and to share its lessons with developing countries.

    In March 2016, the World Bank Group officially launched its Global Knowledge and Research Hub in Malaysia. The new Hub is the first of its kind, serving both as a field presence in Malaysia and as a global knowledge and research hub. It focuses on sharing Malaysia’s people-centered development expertise and creating new innovative policy research on local, regional and global issues.

    The three pillars of work:

    Pillar 1: Sharing the Malaysia Experience with the World. The ‘Malaysia Experience’ is relevant for developing countries in Asia and across regions that are transitioning out of poverty.

    Pillar 2: Supporting Malaysia’s Goal of Becoming a High-Income Economy. The World Bank Group’s international experience will provide Malaysia with a wide array of development solutions and expertise, customized to specific challenges.

    Pillar 3: Learning Together for Global Solutions.  The new hub carries out cutting-edge development policy research in partnership with local and international research institutions.

    The International Finance Corporation (IFC) views Malaysia as a platform for increasing South-South investments as Malaysian companies deepen their investments and presence in emerging markets. As part of this strategy, IFC recently invested in IHH Healthcare, a Malaysia-based healthcare and medical education company with operations in eight countries. In addition, IFC is also looking to mobilize greater volumes for both debt and equity transactions and is exploring possible advisory services programs to address specific needs within Malaysia.

  • Last updated: April 2017

    The World Bank publishes the bi-annual Malaysia Economic Monitor (MEM), which reviews recent economic developments and provides an independent analysis of the near- and medium-term economic outlook. It also provides in-depth analysis of a topic relevant to Malaysia's long-term development. A recent example is the MEM December 2016 issue, titled The Quest for Productivity Growth.  The report focuses on how increasing productivity will become the main engine of economic and income growth in Malaysia in the future, as traditional drivers of growth are expected to moderate, with capital accumulation facing headwinds and labor force growth gradually slowing down as the Malaysian population ages.  The Economic Monitors receive extensive press coverage, and has informed public debate on issues of boosting the quality of education and increasing women’s participation in the labor force.

    Through the World Bank’s Development Economics Research Group (DECRG), the office conducts original studies spanning economic growth and risk management to program evaluation and the implementation of key public services. Through the Global Indicators Group (DECIG), the office will carry out primary data collection and research for the Doing Business, Enterprise Surveys and Enabling the Business of Agriculture projects.

    Studies prepared for the Government have often served as inputs into Malaysia’s 5-year Economic Plan and sectoral strategic plans (e.g. National Higher Education Strategic Plan). Examples include a study on the Knowledge Economy, the Investment Climate Assessment, and the Blueprint for Services Sectors. The study on Moving up the Value Chain led to a shift in using value added instead of foreign direct investment as a key indicator of industry performance. The corporate governance, accounting, and auditing Reports on the Observance of Standards and Codes (ROSC) were used by the Securities Commission to shape relevant reforms, some of which required legislative changes.

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Additional Resources

Country Office Contacts

Kuala Lumpur
Level 3, Sasana Kijang, No. 2, Jalan Dato’ Onn, Kuala Lumpur, Malaysia 50480
Tel: +603 2263-4900
egomez2@worldbank.org
Washington
1818 H Street NW, Washington, DC 20433
Tel: +1 202-473-4709
eastasiapacific@worldbank.org