The World Bank expects Malaysia’s economy to grow at a slower pace in 2016 from a year ago before picking up slightly in 2017 to 2018 as s commodity prices recover and global economic growth improves.
In its Economic Monitor Report, June 2016 which was released yesterday it said Malaysia’s growth remained resilient although its gross domestic product (GDP) was expected to slow down to 4.4% in 2016 from 5% last year.
It said private investment growth was expected to moderate given a less optimistic business sentiment and as commodity prices and global economic growth remain subdued.
“Malaysia’s GDP is expected to grow at 4.5% (2017 and 2018) as commodity prices recover and global economic growth improves.
“Fiscal consolidation remains on track despite lower oil-related revenue achieved through reduction in the government’s operating expenditures and the implementation of the GST in April 2015,” it said.
The World Bank report said trade has been an engine of growth for Malaysia in the last four decades.
“Malaysia is one of the most open economies in the world, with a trade to GDP ratio of 148% (from 2010 to 2014) compared to 58% in developing countries in East Asia and the Pacific.
“The country’s main exports have over time gradually diversified into manufacturing with electrical and electronics accounting for 40% of all exports.
“About 40% of jobs in Malaysia are linked with export activities. Total wages supported by exports has quadrupled between 1995 and 2011.
“Twenty-one trade agreements have been signed by the country which have reduced tariffs, facilitated market access, and opened Malaysia for direct investments,” it said.
The World Bank said the implementation of new regional trade agreements could help Malaysia carry out key economic reforms and accelerate the country’s transition to high-income status.
It pointed out the new generation of regional trade agreements – including the Regional Cooperation Economic Partnership, Trans-Pacific Partnership and European Union Free Trade Agreement – will shape trade and investment over the next decade.
“Commitments in these agreements go beyond tariff reduction: They can have a significant impact on attracting investment and further open up market access for Malaysia’s exports of goods and services.
“Malaysia can use these agreements to push for deeper reforms in competition policy, services trade and support to small and medium enterprises that would otherwise be difficult to initiate.
“The transition might not be easy and proactive measures will be needed to ensure wider benefits under the new regional trade agreements,” it said.