{
  "title": "IMF Staff Completes 2020 Article IV Consultation Visit to Malaysia",
  "publication": "IMF News, December 17, 2019",
  "sourceUrl": "https://www.imf.org/en/news/articles/2019/12/17/pr19466-malaysia-imf-staff-completes-2020-article-iv-consultation-visit",
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  "summary": "An International Monetary Fund (IMF) team, led by Nada Choueiri, visited Kuala Lumpur and Putrajaya from December 5 to December 17, 2019, to conduct discussions for the 2020 Article IV Consultation with Malaysia. At the conclusion of the visit, Ms. Choueiri issued the following statement:",
  "publishDate": "2019-12-17",
  "sections": [
    {
      "heading": "Mission timing and participants",
      "content": "- IMF team led by Nada Choueiri visited Kuala Lumpur and Putrajaya from December 5 to December 17, 2019.\n- Statement issued at the conclusion of the visit by Ms. Choueiri.\n- IMF team to prepare a staff report to be presented to the Executive Board of the IMF, currently expected in February 2020."
    },
    {
      "heading": "Near-term growth and inflation outlook",
      "content": "- Real GDP growth is projected at 4.5 percent for 2019, underpinned by domestic demand.\n- Real GDP growth is projected stable at 4.5 percent in 2020, with domestic demand remaining the main driver.\n- Headline inflation is expected to remain subdued at slightly under 1 percent in 2019.\n- Inflation should average 2.1 percent in 2020 as the effect of the GST removal vanishes."
    },
    {
      "heading": "External sector and capital flows",
      "content": "- Credit growth has moderated recently, and capital flows have been manageable.\n- The current account surplus is projected to increase to 3.5 percent of GDP in 2019.\n- External downside risks highlighted:\n  - Escalating trade tensions (notably U.S.–China).\n  - An abrupt deterioration in market sentiment towards emerging markets.\n  - Weaker-than-expected trading partner growth.\n- External upside risk: finalization of a sustainable phase-one deal between the US and China."
    },
    {
      "heading": "Growth risks — domestic and external",
      "content": "- On balance, risks to the growth outlook are to the downside.\n- Domestic downside risks include:\n  - A sharp drop in real estate prices.\n  - A deterioration in household debt service ability."
    },
    {
      "heading": "Fiscal policy assessment",
      "content": "- The fiscal adjustment planned for 2019 is on track.\n- The 2020 budget strikes a balance between fiscal consolidation and growth.\n- The authorities’ commitment to medium term fiscal consolidation is welcome and would create space for increased social spending and help achieve inclusive growth.\n- Priority: identifying specific revenue and spending measures to support medium term fiscal consolidation."
    },
    {
      "heading": "Monetary policy assessment",
      "content": "- Malaysia’s monetary policy framework has performed well, delivering price stability and robust growth in recent years.\n- The current monetary policy stance is appropriate in the context of a closing output gap.\n- If adverse shocks materialize, policy response could be a combination of:\n  - Use of available fiscal and monetary policy space.\n  - Exchange rate flexibility."
    },
    {
      "heading": "Financial sector soundness",
      "content": "- The financial sector is stable.\n- Banks are well capitalized, profitability has been maintained and asset quality is sound.\n- Vulnerabilities noted:\n  - Household debt is high compared to peers.\n  - The real estate sector represents a vulnerability.\n- The authorities’ close monitoring of these risks is welcome."
    },
    {
      "heading": "Governance and institutional reforms",
      "content": "- Authorities have made progress in governance reforms, including by launching the National Anti-Corruption Plan.\n- Important to sustain momentum and anchor reforms in appropriate legislation."
    },
    {
      "heading": "Structural reform priorities to boost productivity and reach high income status",
      "content": "- Priority measures identified:\n  - (i) continue to promote trade openness;\n  - (ii) continue to improve the business environment by facilitating SME access to credit;\n  - (iii) enhance the quality of and access to education;\n  - (iv) encourage innovation and technology adoption;\n  - (v) boost female labor force participation."
    },
    {
      "heading": "Concluding remarks",
      "content": "- IMF team thanked officials of the Government of Malaysia and Bank Negara Malaysia, and representatives from think tanks, NGOs, and the private sector for helpful discussions.\n- The IMF team noted appreciation for the authorities’ hospitality and looks forward to maintaining a close and productive relationship with Malaysia.\n\nIMF Press Release No. 19/466 — December 17, 2019\n\n---\n\n\n References\n\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2019/12/17/pr19466-malaysia-imf-staff-completes-2020-article-iv-consultation-visit"
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    "Published: December 17, 2019",
    "IMF team led by Nada Choueiri visited Kuala Lumpur and Putrajaya from December 5 to December 17, 2019.",
    "Statement issued at the conclusion of the visit by Ms. Choueiri.",
    "IMF team to prepare a staff report to be presented to the Executive Board of the IMF, currently expected in February 2020.",
    "Real GDP growth is projected at 4.5 percent for 2019, underpinned by domestic demand.",
    "Real GDP growth is projected stable at 4.5 percent in 2020, with domestic demand remaining the main driver.",
    "Headline inflation is expected to remain subdued at slightly under 1 percent in 2019.",
    "Inflation should average 2.1 percent in 2020 as the effect of the GST removal vanishes.",
    "Credit growth has moderated recently, and capital flows have been manageable.",
    "The current account surplus is projected to increase to 3.5 percent of GDP in 2019.",
    "External downside risks highlighted:",
    "External upside risk: finalization of a sustainable phase-one deal between the US and China.",
    "On balance, risks to the growth outlook are to the downside.",
    "Domestic downside risks include:",
    "The fiscal adjustment planned for 2019 is on track.",
    "The 2020 budget strikes a balance between fiscal consolidation and growth.",
    "The authorities’ commitment to medium term fiscal consolidation is welcome and would create space for increased social spending and help achieve inclusive growth.",
    "Priority: identifying specific revenue and spending measures to support medium term fiscal consolidation.",
    "Malaysia’s monetary policy framework has performed well, delivering price stability and robust growth in recent years.",
    "The current monetary policy stance is appropriate in the context of a closing output gap.",
    "If adverse shocks materialize, policy response could be a combination of:",
    "The financial sector is stable.",
    "Banks are well capitalized, profitability has been maintained and asset quality is sound.",
    "Vulnerabilities noted:",
    "The authorities’ close monitoring of these risks is welcome.",
    "Authorities have made progress in governance reforms, including by launching the National Anti-Corruption Plan.",
    "Important to sustain momentum and anchor reforms in appropriate legislation.",
    "Priority measures identified:",
    "IMF team thanked officials of the Government of Malaysia and Bank Negara Malaysia, and representatives from think tanks, NGOs, and the private sector for helpful discussions.",
    "The IMF team noted appreciation for the authorities’ hospitality and looks forward to maintaining a close and productive relationship with Malaysia.",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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