Malaysia’s Economic Outlook: A Moderating Pace of Expansion

Malaysia’s economy has continued to grow, but its pace of expansion has moderated. Growth in the third quarter was at 4.4%, compared to 4.9% in the second quarter of the year, amidst global uncertainty. During this period, private consumption remained the largest contributor to growth while investment dipped. On the supply side, growth moderated in key sectors including services, manufacturing, agriculture, mining and construction. Export growth also softened in the face of weak global demand. Meanwhile, the current account surplus narrowed due to a larger income deficit. Looking ahead, Malaysia’s economy is projected to grow at a relatively moderate pace in 2020, at 4.5%. However, various downside risks in the global environment could have adverse effects on the country’s economy. Near-term policies should focus on increasing government revenue to build fiscal buffers and improving redistribution to protect the vulnerable. Reforms should also focus on addressing gaps in human capital, facilitating economic opportunities for women and improving private sector participation to ensure sustainable and inclusive growth. Similarly, sharpening policies to raise incomes and economic security for the bottom 40% could help ensure improvement in wellbeing and living standards for all Malaysians.

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