Malaysia: Economy

Though buffeted by the slump in oil prices, Malaysia’s economy is projected to post growth through the forecast period that is more moderate than last year’s rate but still solid. Trade and current account surpluses will narrow in 2015, but inflation is seen little changed in year-average terms. Fiscal reform will help to offset lower revenue from hydrocarbons.

Selected economic indicators (%) - Malaysia 2015 2016
GDP Growth 4.7 5.0
Inflation 3.2 2.9
Current Account Balance (share of GDP) 3.3 4.5

Source: ADB estimates.

Economic performance

Buoyant private consumption and strong exports powered the growth in Malaysia’s gross domestic product (GDP) to a 4-year high of 6.0% in 2014, despite slowdowns in both fixed investment and government spending.

Private consumption grew by a robust 7.1%, near the pace in the previous year, to contribute more than half of GDP growth from the demand side. The rise was driven by job creation, low unemployment, and higher wages. Cash transfers from the government continued to supplement incomes and support consumption. Government efforts to rein in the budget deficit saw expansion in government consumption ease to 4.4%.

From the supply side, services grew by 6.3% to generate most of the GDP growth. Communications, wholesale and retail trade, and real estate and business services recorded robust growth, reflecting buoyant household spending and business expansion. Increased tourism spurred the pace of growth in accommodation and restaurants.

Economic prospects

Economic growth is projected to slow in 2015 largely on the impact of weaker demand and the slump in prices for oil and other commodities. The slowdown will be tempered by expected benefits to manufacturing, which now comprises one quarter of the economy, and to services such as tourism. The benefits will flow from lower fuel costs, ringgit depreciation, and, not least, the improving economic outlook in the major industrial economies, particularly the United States.

Excerpted from the Asian Development Outlook 2015.


This page was generated from on 01 September 2015