In the past 30 years, Malaysia has successfully curtailed high poverty rates and reduced income inequalities. Its goal is to attain high income status by 2020 while ensuring that growth is sustainable.
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This economic update provides an
overview for 2013 and early 2014 in Malaysia and an analysis
of structural trends in trade competitiveness. The economy
overcame a weak... Show More + start in 2013 to experience GDP growth
through 2014. The improved performance was driven mainly by
a recovery in exports, including of the long-ailing
electrical and electronics sector. The outlook remains
favorable and GDP is expected to continue growing through
2015. Growth will be sustained by positive external
conditions, with foreign demand outweighing headwinds in
domestic demand. Investment and imports of capital goods
will remain robust as large projects move forward.
Medium-term fiscal consolidation remains on track and the
debt-to-GDP ratio has stabilized, but additional spending
measures are needed for the Government to meet its 2014
deficit target. The central bank has signaled that it may
have to tighten policy to avoid the build-up of financial
imbalances. Labor markets are healthy, and Malaysia has
enjoyed higher employment levels, real wage gains, and
higher labor incomes. External risks to the economic outlook
have receded, but the high share of Malaysiaapos;s foreign
debt means it is sensitive to international volatility.
Boosting exports to fully leverage the improved external
environment will be critical for sustained growth. The
reportapos;s analysis of Malaysiaapos;s trade
competitiveness focuses on its ability to grow exports and
the domestic value-added. Malaysiaapos;s exports had been
faltering since before the Global Financial Crisis. The core
electrical and electronics sector declined in the 2000s, and
Malaysiaapos;s domestic value-added is relatively low due to
limited domestic linkages. Exports of services have also
lagged and remain an area of significant potential.
Restrictive Government policies play a role in hindering
export growth, although the Government has recently embarked
on a liberalization of service sectors. Improving domestic
value-added tasks will require addressing skill gaps.
Finally, Malaysiaapos;s upcoming chairmanship in ASEAN
offers concrete avenues to boost trade competitiveness. Show Less -