{
  "title": "IMF Executive Board Concludes 2018 Article IV Consultation with Malaysia",
  "publication": "IMF News, March 7, 2018",
  "sourceUrl": "https://www.imf.org/en/news/articles/2018/03/07/pr1873-malaysia-imf-executive-board-concludes-2018-article-iv-consultation",
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  "summary": "Malaysian economy showed resilience despite external shocks; progress toward high income status and improving inclusion.",
  "publishDate": "2018-03-07",
  "sections": [
    {
      "heading": "Background and Recent Performance",
      "content": "- Malaysian economy showed resilience despite external shocks; progress toward high income status and improving inclusion.\n- Median household income has risen further and the national poverty ratio declined.\n- Real GDP growth (2017, est.): 5.8 percent, driven by domestic demand and robust exports.\n- Headline consumer price inflation (2017): 3.8 percent; core inflation and credit growth are contained.\n- Current account surplus (2017, est.): 2.8 percent of GDP, helped by strong exports."
    },
    {
      "heading": "Outlook and Risks",
      "content": "- Growth projections:\n  - 2018: 5.3 percent (projected), starting to decelerate from 2017 peak but remaining above potential.\n  - Medium term: convergence to potential rate of close to 5 percent.\n- Inflation:\n  - 2018 headline inflation expected: 3.2 percent.\n  - Core inflation response to positive output gap partly offset by lower oil-price contribution.\n- External balance:\n  - 2018 current account surplus expected to soften to 2.4 percent of GDP as export growth normalizes.\n- Risks to the growth outlook are balanced:\n  - External downside risks: global retreat from cross-border integration; structurally weak advanced-economy growth; significant China slowdown.\n  - External upside risks: speedy approval and implementation of CPTPP; lingering strong global demand for electronics.\n  - Domestic downside risks: exposures in real estate sector.\n  - Domestic upside risk: stronger-than-anticipated confidence effects related to the cyclical upturn."
    },
    {
      "heading": "Executive Board Assessment and Policy Guidance",
      "content": "- Directors commended authorities for strong and resilient performance underpinned by accommodative monetary policy and gradual fiscal consolidation.\n- Emphasis on supporting economic growth while maintaining stability and raising productivity through structural reform.\n- Fiscal policy:\n  - Directors agreed with planned pace of fiscal consolidation in 2018 to build buffers while maintaining financial market confidence.\n  - Supported a gradual consolidation path consistent with the authorities’ fiscal anchor to build additional fiscal space.\n  - Advised that consolidation should prioritize higher revenue to facilitate fiscal measures supporting external rebalancing.\n  - Encouraged progress on fiscal structural agenda, including strengthening fiscal transparency and risk management.\n- Monetary policy and exchange rate:\n  - Directors supported the January increase in the monetary policy rate and the current stance biased toward less accommodation while remaining supportive of demand.\n  - Recommended that monetary policy and exchange rate flexibility remain the first line of defense against shocks.\n- Financial markets and capital flows:\n  - Welcomed improvements in depth and liquidity of onshore financial markets following FMC measures that liberalized and increased flexibility of onshore hedging instruments, and a general rebound of capital inflows to emerging markets.\n  - Supported the FMC’s consultative approach; encouraged authorities to address further gaps in financial market development.\n  - Some Directors urged phasing out measures assessed by staff as capital flow management measures (in a manner that preserves financial stability); a few Directors favored openness to other approaches to development objectives.\n  - Directors urged continued constructive dialogue with IMF staff."
    },
    {
      "heading": "Financial Sector and Housing",
      "content": "- Directors agreed that financial sector risks appear contained: sound bank profitability and liquidity; low nonperforming loans.\n- Vulnerabilities noted: household mortgages and the property development sector require vigilance.\n- Recommendations:\n  - Take necessary steps to mitigate household and property sector risks.\n  - Encourage development of a rental real estate market.\n  - Authorities committed to further actions to address deficiencies in Malaysia’s AML/CFT framework."
    },
    {
      "heading": "Structural Policies and Labor Market",
      "content": "- Commended emphasis on raising productivity and investment; encouraged further labor market reforms.\n- Priority measures recommended:\n  - Encourage female labor force participation.\n  - Improve quality of education.\n  - Reduce skills mismatches.\n  - Bolster public infrastructure and the regulatory framework to further encourage private investment."
    },
    {
      "heading": "Key Statistics and Indicators (as reported)",
      "content": "- Nominal GDP (2017, est.): US$314.4 billion\n- Population (2017, mid-year): 32 million\n- GDP per capita (2017, current prices, est.): US$9,808\n- Poverty rate (2016, national poverty line): 0.4 percent\n- Unemployment rate (November 2017): 3.3 percent\n- Adult literacy rate (2015): 94.6 percent\n- Main exports (share in total goods exports, 2016): electrical & electronic products (36.5 percent), and commodities (13.5 percent)\n\n- Selected annual indicators (Est./Proj. table excerpts):\n  - Real GDP (percent change): 2013: 4.7; 2014: 6.0; 2015: 5.0; 2016: 4.2; 2017: 5.8; 2018: 5.3\n  - Total domestic demand (2017): 6.4\n  - Private consumption (2017): 5.6\n  - Private investment (2017): 9.2\n  - Public gross fixed capital formation (2017): -0.6\n  - Net exports (contribution to growth, 2017): -0.1\n\n- Saving and investment (in percent of GDP):\n  - Gross domestic investment (2017): 25.7\n  - Gross national saving (2017): 27.9\n\n- Fiscal sector (in percent of GDP):\n  - Federal government overall balance 1/ (2017): -3.0\n  - Federal government overall balance 1/ (2018, proj.): -2.8\n  - Revenue (2017): 16.7\n  - Revenue (2018, proj.): 16.6\n  - Expenditure and net lending (2017): 19.3\n  - Federal government non-oil primary balance (2017): -3.5\n  - General government debt 3/ (2017): 53.6\n  - General government debt 3/ (2018, proj.): 52.4\n  - Of which: federal government debt (2017): 50.1; (2018, proj.): 48.9\n\n- Inflation and unemployment (annual average, in percent):\n  - CPI inflation: 2015: 2.1; 2016: 3.1; 2017: 3.8; 2018 (proj.): 3.2; 2019 (proj.): 2.8\n  - CPI inflation (excluding food and energy): 2015: 1.3; 2016: 2.6; 2017: 1.6; 2018 (proj.): 2.2\n  - Unemployment rate: 2015: 3.3; 2016: 2.9; 2017: 3.5; 2018 (proj.): 3.4; 2019 (proj.): 3.0\n\n- Macrofinancial variables:\n  - Broad money (percentage change, 2017): 8.5\n  - Credit to private sector (percentage change): 2013: 10.2; 2014: 8.6; 2015: (not shown); 2016: (not shown); 2017: (not shown)\n  - Credit-to-GDP ratio (in percent) 4/ 6/: 2013: 129.7; 2014: 130.1; 2015: 134.7; 2016: 134.0; 2017: 126.4; 2018 (proj.): 123.7\n  - Credit-to-GDP gap (in percent) 4/ 6/: 2013: 15.7; 2014: 12.7; 2015: 13.5; 2016: 9.4; 2017: …\n  - Overnight policy rate (in percent): 3.00\n  - Three-month interbank rate (in percent): 3.25; 3.9\n  - Nonfinancial corporate sector debt (in percent of GDP): 2013: 99.8; 2014: 98.6; 2015: 106.7; 2016: 109.5; 2017: 104.2; 2018 (proj.): 103.1; 2019 (proj.): 102.1\n  - Household debt (in percent of GDP): 2013: 86.1; 2014: 86.8; 2015: 89.0; 2016: 88.3; 2017: 84.6; 2018 (proj.): 82.5; 2019 (proj.): 80.7\n  - Household financial assets (in percent of GDP): 2013: 187.0; 2014: 182.1; 2015: 183.1; 2016: 181.5; 2017: 177.6\n  - House prices (percentage change): 2013: 10.9; 2014: 6.9; 2015: 5.1; 2016: 5.2\n  - Malaysian ringgit/U.S. dollar (period average): 2013: 3.15; 2014: 3.27; 2015: 3.91; 2016: 4.15; 2017: 4.31\n  - Real effective exchange rate (percentage change): 2013: 0.5; 2014: -0.7; 2015: -7.9; 2016: -4.3; 2017: -1.5\n\n- Balance of payments (in billions of U.S. dollars) 4/:\n  - Current account balance (2013–2017): 11.3; 14.8; 9.0; 8.9; 8.3\n  - Current account balance (In percent of GDP): 2.4\n  - Goods balance (2013–2017): 30.6; 34.6; 28.0; 24.4; 27.1; 28.6; 30.7\n  - Services balance (2013–2017): -3.3; -5.3; -4.6; -5.8; -6.4\n  - Income balance (2013–2017): -16.3; -16.5; -13.7; -12.8; -13.3; -14.4; -15.8\n  - Capital and financial account balance (2013–2017): -24.3; -14.5; 3.6\n  - Direct investment (component): -2.0; -5.5; 1.0; 0.3\n  - Errors and omissions (2013–2017): -1.7; -4.9; 0.0\n  - Overall balance (2013–2017): 4.6; -11.2; 7.7; 11.7\n  - Gross official reserves (US$ billions) (2013–2019): 134.9; 115.9; 95.3; 94.6; 102.4; 113.3; 125.0\n  - Reserves (In months of following year's imports of goods and nonfactor services): 7.5\n  - Reserves (In percent of short-term debt by original maturity) 4/: 130.7; 111.6; 116.2; 112.5; 111.7; 123.9; 143.6\n  - Reserves (In percent of short-term debt by remaining maturity) 4/: 91.8; 78.3; 74.4; 71.5; 72.1; 79.0; 87.2\n  - Total external debt (in billions of U.S. dollars) 4/ (2013–2019): 212.3; 213.4; 195.0; 204.2; 217.3; 221.2; 227.5\n  - Total external debt (In percent of GDP) 4/ (2013–2019): 65.7; 63.1; 65.8; 68.9; 69.1; 63.0; 58.6\n  - Short-term external debt (in percent of total, original maturity) 4/: 48.6; 48.7; 42.0; 41.2; 42.2; 41.3; 38.3\n  - Short-term external debt (in percent of total, remaining maturity) 4/: 69.3; 69.4; 64.7; 65.4; 64.9\n  - Debt service ratio (In percent of exports of goods and services) 7/: 17.9; 21.4; 23.5; 22.7; 23.0; 23.1\n  - Debt service ratio (In percent of exports of goods and nonfactor services): 18.4; 24.9; 24.1; 24.5\n\n- Memorandum item:\n  - Nominal GDP (in billions of ringgit): 2013: 1,019; 2014: 1,106; 2015: 1,158; 2016: 1,230; 2017: 1,352; 2018 (proj.): 1,467; 2019 (proj.): 1,584\n\nSource: IMF Press Release No. 18/73 — IMF Executive Board Concludes 2018 Article IV Consultation with Malaysia (March 7, 2018).\n\n---\n\n\n References\n\n- The Executive Board\n- Staff Report\n- Selected Issues\n- Malaysia and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.imf.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2018/03/07/pr1873-malaysia-imf-executive-board-concludes-2018-article-iv-consultation"
    }
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    "Published: March 7, 2018",
    "Malaysian economy showed resilience despite external shocks; progress toward high income status and improving inclusion.",
    "Median household income has risen further and the national poverty ratio declined.",
    "Real GDP growth (2017, est.): 5.8 percent, driven by domestic demand and robust exports.",
    "Headline consumer price inflation (2017): 3.8 percent; core inflation and credit growth are contained.",
    "Current account surplus (2017, est.): 2.8 percent of GDP, helped by strong exports.",
    "Growth projections:",
    "Inflation:",
    "External balance:",
    "Risks to the growth outlook are balanced:",
    "Directors commended authorities for strong and resilient performance underpinned by accommodative monetary policy and gradual fiscal consolidation.",
    "Emphasis on supporting economic growth while maintaining stability and raising productivity through structural reform.",
    "Fiscal policy:",
    "Monetary policy and exchange rate:",
    "Financial markets and capital flows:",
    "Directors agreed that financial sector risks appear contained: sound bank profitability and liquidity; low nonperforming loans.",
    "Vulnerabilities noted: household mortgages and the property development sector require vigilance.",
    "Recommendations:",
    "Commended emphasis on raising productivity and investment; encouraged further labor market reforms.",
    "Priority measures recommended:",
    "Nominal GDP (2017, est.): US$314.4 billion",
    "Population (2017, mid-year): 32 million",
    "GDP per capita (2017, current prices, est.): US$9,808",
    "Poverty rate (2016, national poverty line): 0.4 percent",
    "Unemployment rate (November 2017): 3.3 percent",
    "Adult literacy rate (2015): 94.6 percent",
    "Main exports (share in total goods exports, 2016): electrical & electronic products (36.5 percent), and commodities (13.5 percent)",
    "Selected annual indicators (Est./Proj. table excerpts):",
    "Saving and investment (in percent of GDP):",
    "Fiscal sector (in percent of GDP):",
    "Inflation and unemployment (annual average, in percent):",
    "Macrofinancial variables:",
    "Balance of payments (in billions of U.S. dollars) 4/:",
    "Memorandum item:",
    "[The Executive Board](http://www.imf.org/external/np/sec/memdir/eds.aspx)",
    "[Staff Report](https://www.imf.org/en/publications/cr/issues/2018/03/07/malaysia-2018-article-iv-consultation-press-release-staff-report-and-statement-by-the-45677)",
    "[Selected Issues](https://www.imf.org/en/publications/cr/issues/2018/03/07/malaysia-selected-issues-45678)",
    "[Malaysia and the IMF](http://www.imf.org/external/country/MYS/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.imf.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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