Malaysian Economy

Malaysia is a highly open, upper-middle income economy. Malaysia was one of 13 countries
identified by the Commission on Growth and Development in its 2008 Growth Report to
have recorded average growth of more than 7 percent per year for 25 years or more.
Economic growth was inclusive, as Malaysia also succeeded in nearly eradicating poverty:
the share of households living below the national poverty line (USD 8.50 per day in 2012)
fell from over 50 percent in the 1960s to less than 1 percent currently.

From an economy dominated by the production of raw natural resource materials, such as tin
and rubber, even as recently as the 1970s, Malaysia today has a diversified economy and has
become a leading exporter of electrical appliances, electronic parts and components, palm oil,
and natural gas. After the Asian financial crisis of 1997-1998, Malaysia continued to post
solid growth rates, averaging 5.5 percent per year from 2000-2008. Malaysia was hit by the
Global Financial Crisis in 2009 but recovered rapidly, posting growth rates averaging 5.7
percent since 2010.

Though poverty is less than 1 percent, pockets of poverty remain and income inequality
remains high relative to other developed countries: Malaysias gini coefficient of income
inequality stood at 0.41 in 2014, compared with 0.31 and 0.33 in the Republic of Korea and
Japan (both as of 2010), for example. Real income of the bottom 40 percent of households
increased by an average 6.3 percent per year between 2009 and 2012, compared to 5.2
percent for the average household, suggesting the benefits from growth were being shared.

Malaysias near-term economic outlook remains overall favorable, despite some risks. The
economy has diversified from commodities and the Government has taken steps to broaden
the revenue base by introducing a Goods and Services Tax in 2015. Short-term risks include
further declines in oil prices and oil related taxes that still account for around 17 percent of
public revenues, although this is partially compensated by the removal of fuel subsidies in
2014. Other risks are related to the volatility in capital flows from the normalization of US
monetary policy. The long-term sustainability of this favorable outlook hinges on structural
reforms to strengthen medium-term fiscal planning, and to boost capabilities and competition
within the economy.

Accelerated implementation of productivity-enhancing reforms to increase the quality of

human capital and create more competition in the economy will be key for Malaysia to secure
a lasting place among the ranks of high-income economies. Malaysia has been working to
address these challenges. In 2010, Malaysia launched the New Economic Model (NEM),
which aims for the country to reach high income status by 2020 while ensuring that growth is
also sustainable and inclusive. The NEM includes a number of reforms to achieve economic
growth that is primarily driven by the private sector and moves the Malaysian economy into
higher value-added activities in both industry and services.

Malaysia Economy Data

2011 2012 2013 2014 2015

Population (million) 29.1 29.5 29.9 30.3 30.8

GDP per capita (USD) 10,282 10,883 10,785 10,737 10,222

GDP (USD bn) 299 316 324 340 298

Economic Growth (GDP, annual variation in %) 5.3 5.5 4.7 6.0 5.0

Consumption (annual variation in %) 6.9 8.4 7.3 7.0 6.0

Investment (annual variation in %) 6.4 19.0 8.2 4.8 3.7

Industrial Production (annual variation in %) 2.4 4.2 3.4 5.1 4.5

Unemployment Rate 3.0 3.0 3.0 3.0 3.3

Fiscal Balance (% of GDP) -4.7 -4.4 -3.8 -3.4 -3.2

Public Debt (% of GDP) 50.0 51.7 53.0 52.7 54.5

Money (annual variation in %) 14.7 9.7 7.7 7.5 2.9

 2011 2012 2013 2014 2015

Inflation Rate (CPI, annual variation in %, eop) 3.0 1.3 3.2 2.7 2.7

Inflation Rate (CPI, annual variation in %) 3.2 1.7 2.1 3.1 2.1

Inflation (PPI, annual variation in %) 12.0 -0.2 -2.4 1.3 -7.5

Policy Interest Rate (%) 3.00 3.00 3.00 3.25 3.25

Stock Market (annual variation in %) 20.7 0.1 7.0 10.8 -1.3

Exchange Rate (vs USD) 3.17 3.06 3.28 3.50 4.29

Exchange Rate (vs USD, aop) 3.06 3.09 3.15 3.27 3.91

Current Account (% of GDP) 10.9 5.2 3.4 4.3 2.9

Current Account Balance (USD bn) 32.6 16.4 11.2 14.5 8.8

Trade Balance (USD billion) 40.5 31.1 22.4 25.1 24.0

Exports (USD billion) 228 228 229 234 200

Imports (USD billion) 187 197 206 209 176

Exports (annual variation in %) 14.4 0.0 0.4 2.4 -14.6

Imports (annual variation in %) 13.5 5.0 4.9 1.4 -15.8

International Reserves (USD) 134 140 135 116 95.3

External Debt (% of GDP) 56.7 62.3 65.6 62.9 65.1