Regions and Countries

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p. 21 of 47 BACK | NEXT Developing Asia and the Pacific The global economy Newly industrialized economies Central Asian republics, Azerbaijan and Mongolia People’s Republic of China Southeast Asia Cambodia Indonesia Lao People’s Democratic Republic Malaysia Myanmar Philippines Thailand Viet Nam East Timor South Asia The Pacific

Malaysia

Economic performance

Economic growth: GDP growth in Malaysia during 2000 is estimated by the Government at 8.5 percent, as a result of robust external demand for manufactured goods, buoyant consumer demand, and a recovery in gross fixed investment. Reflecting a strong fiscal stimulus in 2000, public investment is projected to rise by 14.5 percent, compared with 7.9 percent in 1999. Growth in private investment is also projected to have rebounded to 27.2 percent. Private consumption demand remained at relatively high levels because of improved consumer confidence, resulting from a recovery-induced increase in disposable income and low interest rates. On the supply side, higher growth led by the manufacturing subsector was followed by a rebound in the services sector because of the overall improvement in economic performance. Construction activity grew moderately. Agriculture sector output grew marginally, as moderate growth in crude palm oil production and sawlogs was offset by a decline in rubber output.

Employment: The continuing recovery led to a decline in the unemployment rate to 2.9 percent of the labor force in 2000, from 3.0 percent in 1999. Reflecting a higher level of economic activity, the number of job vacancies in 2000 increased by 14 percent relative to 1999, whereas the number of workers retrenched declined by 32.4 percent. Although real wages increased by an estimated 12.9 percent during the year, this was more than offset by an increase in real labor productivity of 22.7 percent.

Inflation: After averaging 2.8 percent in 1999, consumer price inflation decreased steadily during 2000 to average 1.6 percent. Despite an increase in inflation during the fourth quarter of 2000 because of higher energy prices and bus fares, overall inflation during the year was kept subdued by moderate food price increases, minimal imported inflation, and persistent excess capacity in some sectors of the economy.

Fiscal balance: During 2000, the Government pursued expansionary fiscal and monetary policies to consolidate and extend the economic recovery. The fiscal deficit for 2000 is officially estimated at Malaysian dollar (M$)18 billion, or 5.5 percent of GDP, representing a large increase over the previous year’s actual deficit of M$9.5 billion (3.2 percent of GDP).

External sector: The trade account is estimated to register a surplus of $19.6 billion in 2000, lower than the surplus of $22.8 billion recorded in 1999, as import growth outpaced export growth. The services account is, however, estimated to record a larger deficit, owing to Malaysia’s dependence on trade-related service imports and increased outflows of profits and dividend payments from an improving Malaysian economy. These developments have led to a fall in the current account surplus from 15.9 percent of GDP in 1999 to an estimated 8.8 percent of GDP in 2000. A smaller current account surplus and a deficit in the overall capital account led to a decline in external reserves to $29.9 billion (or 4.5 months of imports) as of end-2000, compared with $30.8 billion as of end-1999. Malaysia’s external debt position improved during the first nine months of 2000 because of higher repayments of short-term debt. The debt service ratio decreased correspondingly from 4.8 percent at the end of 1999 to 4.2 percent at end-September 2000.

Domestic policies: With inflationary pressures remaining subdued, the Government continued with its accommodative monetary policy stance, maintaining low interest rates and its fixed exchange rate regime. Total loans outstanding in the banking system at end-2000 amounted to M$453 billion, an increase of 5.2 percent relative to the end-1999 level of M$429.7 billion. During the year, substantial progress was made in merging the country’s domestic banks to achieve a more effective and competitive banking system.

ADB operations

Operational strategy: ADB’s operational strategy for Malaysia was approved before the Asian financial crisis in 1997, and is therefore no longer relevant. In the short term, the Government and ADB might envisage a lighter assistance program for Malaysia, which would include ADB’s goal of reducing poverty and strengthening regional cooperation.

Policy dialogue: New areas of policy dialogue are expected in line with the objectives and scope of the assistance program to which the Government and ADB agree.

Loans and technical assistance: No loans or technical assistance grants were approved in 2000.

Project implementation: Since becoming a member of ADB in 1966, Malaysia has received 76 loans, of which 5 were active at the end of 2000. Contract awards totaled $24.5 million, bringing the cumulative figure to $1.4 billion. The contract award ratio was 24.6 percent, higher than the ADB-wide average of 21 percent. Disbursements during the year totaled $48.7 million, bringing cumulative disbursements to $1.4 billion. The disbursement ratio was 29.9 percent, higher than the ADB-wide average of 20.5 percent.

   

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