## IMF Executive Board Concludes 2018 Article IV Consultation with Malaysia _IMF News, March 7, 2018_ ## Source details **Canonical URL:** [IMF Executive Board Concludes 2018 Article IV Consultation with Malaysia](https://www.imf.org/en/news/articles/2018/03/07/pr1873-malaysia-imf-executive-board-concludes-2018-article-iv-consultation) ## Other formats - [Markdown version](/en/news/articles/2018/03/07/pr1873-malaysia-imf-executive-board-concludes-2018-article-iv-consultation/index.md) - [Structured JSON version](/en/news/articles/2018/03/07/pr1873-malaysia-imf-executive-board-concludes-2018-article-iv-consultation/index.json) - [Bundle manifest](/en/news/articles/2018/03/07/pr1873-malaysia-imf-executive-board-concludes-2018-article-iv-consultation/bundle-manifest.json) ## Bibliographic details - Published: March 7, 2018 --- ### Background and Recent Performance - 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. ### Outlook and Risks - Growth projections: - 2018: 5.3 percent (projected), starting to decelerate from 2017 peak but remaining above potential. - Medium term: convergence to potential rate of close to 5 percent. - Inflation: - 2018 headline inflation expected: 3.2 percent. - Core inflation response to positive output gap partly offset by lower oil-price contribution. - External balance: - 2018 current account surplus expected to soften to 2.4 percent of GDP as export growth normalizes. - Risks to the growth outlook are balanced: - External downside risks: global retreat from cross-border integration; structurally weak advanced-economy growth; significant China slowdown. - External upside risks: speedy approval and implementation of CPTPP; lingering strong global demand for electronics. - Domestic downside risks: exposures in real estate sector. - Domestic upside risk: stronger-than-anticipated confidence effects related to the cyclical upturn. ### Executive Board Assessment and Policy Guidance - 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: - Directors agreed with planned pace of fiscal consolidation in 2018 to build buffers while maintaining financial market confidence. - Supported a gradual consolidation path consistent with the authorities’ fiscal anchor to build additional fiscal space. - Advised that consolidation should prioritize higher revenue to facilitate fiscal measures supporting external rebalancing. - Encouraged progress on fiscal structural agenda, including strengthening fiscal transparency and risk management. - Monetary policy and exchange rate: - Directors supported the January increase in the monetary policy rate and the current stance biased toward less accommodation while remaining supportive of demand. - Recommended that monetary policy and exchange rate flexibility remain the first line of defense against shocks. - Financial markets and capital flows: - 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. - Supported the FMC’s consultative approach; encouraged authorities to address further gaps in financial market development. - 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. - Directors urged continued constructive dialogue with IMF staff. ### Financial Sector and Housing - 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: - Take necessary steps to mitigate household and property sector risks. - Encourage development of a rental real estate market. - Authorities committed to further actions to address deficiencies in Malaysia’s AML/CFT framework. ### Structural Policies and Labor Market - Commended emphasis on raising productivity and investment; encouraged further labor market reforms. - Priority measures recommended: - Encourage female labor force participation. - Improve quality of education. - Reduce skills mismatches. - Bolster public infrastructure and the regulatory framework to further encourage private investment. ### Key Statistics and Indicators (as reported) - 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): - Real GDP (percent change): 2013: 4.7; 2014: 6.0; 2015: 5.0; 2016: 4.2; 2017: 5.8; 2018: 5.3 - Total domestic demand (2017): 6.4 - Private consumption (2017): 5.6 - Private investment (2017): 9.2 - Public gross fixed capital formation (2017): -0.6 - Net exports (contribution to growth, 2017): -0.1 - Saving and investment (in percent of GDP): - Gross domestic investment (2017): 25.7 - Gross national saving (2017): 27.9 - Fiscal sector (in percent of GDP): - Federal government overall balance 1/ (2017): -3.0 - Federal government overall balance 1/ (2018, proj.): -2.8 - Revenue (2017): 16.7 - Revenue (2018, proj.): 16.6 - Expenditure and net lending (2017): 19.3 - Federal government non-oil primary balance (2017): -3.5 - General government debt 3/ (2017): 53.6 - General government debt 3/ (2018, proj.): 52.4 - Of which: federal government debt (2017): 50.1; (2018, proj.): 48.9 - Inflation and unemployment (annual average, in percent): - CPI inflation: 2015: 2.1; 2016: 3.1; 2017: 3.8; 2018 (proj.): 3.2; 2019 (proj.): 2.8 - CPI inflation (excluding food and energy): 2015: 1.3; 2016: 2.6; 2017: 1.6; 2018 (proj.): 2.2 - Unemployment rate: 2015: 3.3; 2016: 2.9; 2017: 3.5; 2018 (proj.): 3.4; 2019 (proj.): 3.0 - Macrofinancial variables: - Broad money (percentage change, 2017): 8.5 - Credit to private sector (percentage change): 2013: 10.2; 2014: 8.6; 2015: (not shown); 2016: (not shown); 2017: (not shown) - 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 - Credit-to-GDP gap (in percent) 4/ 6/: 2013: 15.7; 2014: 12.7; 2015: 13.5; 2016: 9.4; 2017: … - Overnight policy rate (in percent): 3.00 - Three-month interbank rate (in percent): 3.25; 3.9 - 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 - 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 - Household financial assets (in percent of GDP): 2013: 187.0; 2014: 182.1; 2015: 183.1; 2016: 181.5; 2017: 177.6 - House prices (percentage change): 2013: 10.9; 2014: 6.9; 2015: 5.1; 2016: 5.2 - Malaysian ringgit/U.S. dollar (period average): 2013: 3.15; 2014: 3.27; 2015: 3.91; 2016: 4.15; 2017: 4.31 - Real effective exchange rate (percentage change): 2013: 0.5; 2014: -0.7; 2015: -7.9; 2016: -4.3; 2017: -1.5 - Balance of payments (in billions of U.S. dollars) 4/: - Current account balance (2013–2017): 11.3; 14.8; 9.0; 8.9; 8.3 - Current account balance (In percent of GDP): 2.4 - Goods balance (2013–2017): 30.6; 34.6; 28.0; 24.4; 27.1; 28.6; 30.7 - Services balance (2013–2017): -3.3; -5.3; -4.6; -5.8; -6.4 - Income balance (2013–2017): -16.3; -16.5; -13.7; -12.8; -13.3; -14.4; -15.8 - Capital and financial account balance (2013–2017): -24.3; -14.5; 3.6 - Direct investment (component): -2.0; -5.5; 1.0; 0.3 - Errors and omissions (2013–2017): -1.7; -4.9; 0.0 - Overall balance (2013–2017): 4.6; -11.2; 7.7; 11.7 - Gross official reserves (US$ billions) (2013–2019): 134.9; 115.9; 95.3; 94.6; 102.4; 113.3; 125.0 - Reserves (In months of following year's imports of goods and nonfactor services): 7.5 - 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 - 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 - 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 - Total external debt (In percent of GDP) 4/ (2013–2019): 65.7; 63.1; 65.8; 68.9; 69.1; 63.0; 58.6 - 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 - Short-term external debt (in percent of total, remaining maturity) 4/: 69.3; 69.4; 64.7; 65.4; 64.9 - Debt service ratio (In percent of exports of goods and services) 7/: 17.9; 21.4; 23.5; 22.7; 23.0; 23.1 - Debt service ratio (In percent of exports of goods and nonfactor services): 18.4; 24.9; 24.1; 24.5 - Memorandum item: - 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 *Source: IMF Press Release No. 18/73 — IMF Executive Board Concludes 2018 Article IV Consultation with Malaysia (March 7, 2018).* --- ## References - [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) _Source: https://www.imf.org/en/news/articles/2018/03/07/pr1873-malaysia-imf-executive-board-concludes-2018-article-iv-consultation_