Malaysia: 2023 Article IV Consultation-Press Release and Staff Report

IMF Staff Country Reports, June 1, 2023

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Canonical URL: Malaysia: 2023 Article IV Consultation-Press Release and Staff Report

Malaysia registered a strong economic recovery in 2022, backed by its well-diversified economy, sound policy frameworks, and commodity exporter status.
Monetary policy started a gradual post-pandemic normalization in 2022.
Record costly spending on fuel subsidies broadly kept inflationary pressures suppressed in 2022.
The new national unity government has signaled its commitment to the reform priorities outlined in the Twelfth Malaysia Plan and the 2023 Budget to propel the economy toward net-zero greenhouse gas emissions and high-income status.
There is a positive output gap and ongoing inflationary pressures that warrant policy attention.
The financial sector remains healthy but warrants stepped-up monitoring, especially of highly leveraged entities and non-bank financial institutions, given increased risks from:
- rising interest rates,
- tighter financial conditions,
- exchange rate depreciation,
- weaker expected growth.

Near-term policies should focus on accelerating the pace of policy tightening, while managing downside risks and trade-offs.
Stepped-up monitoring of the financial sector, with particular attention to highly leveraged entities and non-bank financial institutions.
Expand the macroprudential toolkit to support financial stability efforts.

Subject areas: External debt, Fiscal policy, Inflation, International organization, Monetary policy, Prices, Public debt, Revenue administration.
Keywords highlighted in the report: asset forfeiture regime, balance of payments position, coverage ratio, Global, Inflation, inflation expectation, Malaysia's obligation, PPI weight.
Key macro-financial risks: interaction of policy tightening with households and corporates, vulnerabilities in non-bank financial institutions, and external shocks affecting exchange rates and growth.