Malaysia Getting Closer To High-Income Status, Says IMF
The International Monetary Fund (IMF) in its latest country report on Malaysia concluded that the nation is “well on its way to achieving high-income status,” but still has work to do to “pass the finishing line.”
Malaysia’s economy continues to perform strongly, the IMF noted, with higher than anticipated growth at 5.8 per cent in 2017, and projected growth of 5.3 per cent for 2018. However, to reach its target, the authorities will have to step up reforms to boost productivity and raise living standards for its 32 million citizens.
Malaysia’s government has set itself a goal in its “Vision 2020” to reach high-income status – which is defined by gross national income per capita of $15,000 annually – by that year. In 2017, this income measure was still below $10,000, and economist doubt that such a big rise can be realised in just two years from now.
Nada Choueiri, IMF mission chief for Malaysia, said efforts have been made by the government to boost productivity with the establishment of the 11th Malaysia Plan in charting a path toward advanced economy status and greater inclusion.
“Increasing productivity and encouraging more innovation are core objectives of the plan, which has six strategic pillars that touch on a range of development issues,” Choueiri said, adding that the development issues include equity, inclusiveness, environmental sustainability, human capital development and infrastructure.
Choueiri said the plan, covering the years from 2016 to 2020, also puts significant emphasis on improving labour market outcomes and targets increases in labour market’s share of income, female labour force participation and skilled labour employment, as well as improvements in education quality and matching skills to industry needs.
On IMF’s annual assessment of Malaysia’s economy, Choueiri said the economy is showing resilience and continues to grow at a sustained pace despite external shocks.
“Growth is running above potential, driven by strong global demand for electronics and improved terms of trade for commodities, such as oil and gas,” the IMF economist noted.
On the domestic front, Malaysia’s strong employment is boosting private consumption, and investment is also helping to drive growth.
“Looking ahead, our advice to the authorities is to maintain gradual fiscal consolidation but, at the same time, also continue to increase revenue to protect social and development spending,” Choueiri said.