{ "title": "IMF Executive Board Concludes 2020 Article IV Consultation with Malaysia", "publication": "IMF News, February 27, 2020", "sourceUrl": "https://www.imf.org/en/news/articles/2020/02/27/pr2071-malaysia-imf-executive-board-concludes-2020-article-iv-consultation", "canonical": "https://www.imf.org/en/news/articles/2020/02/27/pr2071-malaysia-imf-executive-board-concludes-2020-article-iv-consultation", "overlayPath": "/en/news/articles/2020/02/27/pr2071-malaysia-imf-executive-board-concludes-2020-article-iv-consultation/index.md", "summary": "Growth has averaged just under 5 percent over the past 5 years.", "publishDate": "2020-02-27", "sections": [ { "heading": "Economic performance and recent developments", "content": "- Growth has averaged just under 5 percent over the past 5 years.\n- Real GDP growth is estimated at 4.5 percent in 2019, driven by domestic demand.\n- Headline inflation moderated from an average of 1 percent in 2018 to 0.7 percent in 2019.\n- Factors affecting inflation: declining global oil prices, moderating wage growth, and the impact of replacing the GST with the smaller-base SST in 2018.\n- Credit growth is moderating.\n- Current account surplus is estimated to have increased to 3.5 percent of GDP in 2019, driven by a temporary decline in capital imports and an improvement in the primary income account." }, { "heading": "Outlook and projections", "content": "- Growth is expected to remain stable in 2020 and to rebound in the medium term.\n- Domestic demand will be the main driver of growth, supported by stable employment and income growth.\n- Private investment is projected to gradually pick up as the business environment improves and external uncertainties dissipate.\n- Headline inflation is expected to increase to slightly over 2 percent as domestic demand rises, the base effect of the consumption tax regime change vanishes, and fuel subsidies become targeted.\n- Current account surplus is expected to narrow to 2.7 percent of GDP as capital imports resume.\n- Over the medium term:\n - Growth should converge to potential (just below 5 percent).\n - Inflation should remain under control.\n - Current account surplus should continue to moderate." }, { "heading": "Risks to the outlook", "content": "- Downside risks predominate on balance:\n - Vulnerability to escalating trade actions and weaker-than-expected trading partners’ growth given Malaysia’s highly open economy.\n - An abrupt deterioration in market sentiment towards emerging markets could lead to tighter financial conditions.\n - Domestic contingent liabilities could pose fiscal risks.\n - A sharp drop in real estate prices or deterioration in household debt service ability could affect growth and financial stability.\n - Domestic policy uncertainty could reduce investment.\n- Upside risk:\n - A durable truce following the phase-one deal between the US and China could be an upside." }, { "heading": "Executive Board assessment and policy recommendations", "content": "- Directors welcomed stability and progress on the reform agenda; encouraged continued commitment to governance and structural reforms.\n- Fiscal policy:\n - Continue to focus on a medium-term fiscal consolidation plan while safeguarding growth and financial stability.\n - Identify well-defined spending and revenue measures to support consolidation, including in the context of the upcoming medium-term revenue strategy preparation.\n - Push ahead with adoption of a Fiscal Responsibility Act.\n - Improve debt management, public procurement, and the public investment framework.\n- Monetary and exchange rate policy:\n - Supported a broadly neutral monetary policy stance, given a closing output gap and broadly neutral financial conditions.\n - Monetary policy should remain data dependent.\n - Commended commitment to exchange rate flexibility and encouraged further efforts to deepen FX markets to enhance the exchange rate’s role as a shock absorber.\n - Advise continued review of FX market measures and consider gradual phasing out of such measures.\n- Financial sector:\n - Agreed the financial sector is stable; profitability, capitalization and asset quality of banks are sound.\n - Noted household debt is high compared to peers, with pockets of vulnerability among lower-income groups.\n - Advised close monitoring of risks in the real estate and household sectors.\n - Further enhance the macroprudential toolkit.\n - Commended efforts to strengthen financial literacy and manage cyber risks and climate change risks to the financial sector.\n- Governance and anti-corruption:\n - Commended progress in governance reforms and stressed the importance of sustaining momentum and anchoring reforms in legislation.\n - Priorities: secure independence of anti-corruption institutions, freedom of information, establish an asset declaration system.\n - Further strengthen the AML/CFT framework.\n- Structural reforms to raise investment and productivity:\n - Priority actions: enhance the business environment and improve access to credit for SMEs; promote trade openness; enhance the quality of and access to education; encourage innovation, including through digitalization; boost female labor participation.\n - Raising productivity is important to achieve high-income status and inclusive growth and to address external imbalances over the medium term." }, { "heading": "Key statistics and selected indicators (highlights)", "content": "- Nominal GDP (2019): US$364 billion\n- Population (2018): 32.4 million\n- GDP per capita (2019, current prices): US$11,173\n- Poverty rate (2017, national poverty line): 0.4 percent\n- Unemployment rate (2019): 3.4 percent\n- Adult literacy rate (2018): 95.9 percent\n- Main goods exports (share in total, 2018): electrical & electronics (37.7 percent), commodities (15.6 percent), and petroleum products (7.5 percent).\n- Selected series (est./proj. where shown):\n - Real GDP (percent change): 2015: 5.0; 2016: 4.4; 2017: 5.7; 2018: 4.7; 2019: 4.5; 2020: 4.9\n - Total domestic demand 1/: 2015: 5.8; 2016: 4.8; 2017: 6.5; 2018: 4.3; 2019: 3.4; 2020: 5.6; 2021: 6.3\n - Private consumption: 2015: 5.9; 2016: 6.9; 2017: 8.0; 2018: 7.0; 2019: 6.2; 2020: 5.4\n - Net exports (contribution to growth, percentage points): 2015: -0.3; 2016: 0.0; 2017: 0.8; 2018: 1.4; 2019: -0.7; 2020: -0.9\n - Gross domestic investment (in percent of GDP): 2015: 25.4; 2016: 26.0; 2017: 25.6; 2018: 23.6; 2019: 22.0; 2020: 22.1; 2021: 22.9\n - Gross national saving (in percent of GDP): 2015: 28.4; 2016: 25.7; 2017: 25.5; 2018: 24.8\n - Federal government overall balance (in percent of GDP) 2/: 2015: -3.2; 2016: -3.1; 2017: -2.9; 2018: -3.7; 2019: -3.4; 2020: -3.0\n - Revenue (in percent of GDP): 2015: 18.6; 2016: 17.0; 2017: 16.1; 2018: 17.4; 2019: 15.1\n - Expenditure and net lending (in percent of GDP): 2015: 21.8; 2016: 20.1; 2017: 19.0; 2018: 19.8; 2019: 18.3; 2020: 18.1\n - Consolidated public sector overall balance 4/: 2015: -7.6; 2016: -3.6; 2017: -4.6; 2018: -6.3; 2019: -5.6; 2020: -5.2\n - General government debt 4/ (in percent of GDP): 2015: 57.0; 2016: 55.8; 2017: 54.4; 2018: 55.6; 2019: 57.1; 2020: 56.5\n - CPI inflation (annual average, in percent): 2017: 2.1; 2018: 3.7; 2019: 0.7\n - CPI inflation (excluding food and energy): 2017: 3.2; 2018: 2.6; 2019: 1.6; 2020: 0.4; 2021: 1.2; 2022: 2.0\n - Broad money (percentage change) 5/: 2015: 2.7; 2016: 7.7; 2017: 6.7; 2018: 7.1\n - Credit to private sector (percentage change) 5/: 2015: 8.6; 2016: 5.3; 2017: 8.3\n - Credit-to-GDP ratio (in percent) 6/ 7/: 2015: 132.5; 2016: 131.9; 2017: 126.7; 2018: 130.1; 2019: 130.9; 2020: 131.4\n - Credit-to-GDP gap (in percent) 6/ 7/: 2015: 13.5; 2016: 9.4; 2017: 2.5; 2018: 0.6\n - Overnight policy rate (in percent): 2018: 3.25; 2019: 3.00\n - Three-month interbank rate (in percent): 2018: 3.8; 2019: 3.6\n - Nonfinancial corporate sector debt (in percent of GDP) 8/: 2015: 105.0; 2016: 108.0; 2017: 101.5; 2018: 103.0; 2019: 99.4\n - Household debt (in percent of GDP) 8/: 2015: 86.9; 2016: 86.5; 2017: 82.7; 2018: 82.0; 2019: 81.9\n - Households financial assets (in percent of GDP) 8/: 2015: 180.1; 2016: 178.6; 2017: 176.5; 2018: 175.8\n - House prices (percentage change): 2017: 7.4; 2018: 1.5\n - Malaysian ringgit/U.S. dollar (period average): 2015: 3.91; 2016: 4.15; 2017: 4.30; 2018: 4.04; 2019: 4.16\n - Real effective exchange rate (percentage change): 2015: -8.5; 2016: -1.6; 2017: 4.1; 2018: -2.0\n - Current account balance (in billions of U.S. dollars) 6/: 2015: 7.2; 2016: 8.9; 2017: 12.7; 2018: 10.3; 2019: 7.9\n - Current account (in percent of GDP): 2015: 2.8\n - Goods balance (in billions of U.S. dollars): 2015: 28.0; 2016: 24.6; 2017: 27.2; 2018: 29.5; 2019: 28.5; 2020: 27.1\n - Income balance (in billions of U.S. dollars): 2015: -13.7; 2016: -12.8; 2017: -13.0; 2018: -17.6; 2019: -13.5; 2020: -14.3; 2021: -14.9\n - Capital and financial account balance (in billions of U.S. dollars): 2015: -14.5; 2016: -1.1; 2017: 4.6; 2018: -9.2; 2019: -7.4\n - Gross official reserves (US$ billions) 6/ 9/: 2015: 95.3; 2016: 94.5; 2017: 102.4; 2018: 101.4; 2019: 103.4; 2020: 106.4; 2021: 109.8\n - Total external debt (in billions of U.S. dollars) 6/ 9/: 2015: 195.0; 2016: 203.8; 2017: 218.8; 2018: 223.8; 2019: 227.0; 2020: 224.7; 2021: 225.4\n - Debt service ratio (in percent of exports of goods and services) 10/: 2015: 21.5; 2016: 23.4; 2017: 14.0; 2018: 10.6; 2019: 10.9; 2020: 10.7; 2021: 10.4\n - Memorandum: Nominal GDP (in billions of ringgit): 2015: 1,177; 2016: 1,250; 2017: 1,372; 2018: 1,447; 2019: 1,516; 2020: 1,617; 2021: 1,731\n\nSource: IMF press release \"IMF Executive Board Concludes 2020 Article IV Consultation with Malaysia\", February 27, 2020.\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\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/2020/02/27/pr2071-malaysia-imf-executive-board-concludes-2020-article-iv-consultation" } ], "bullets": [ "[Markdown version](/en/news/articles/2020/02/27/pr2071-malaysia-imf-executive-board-concludes-2020-article-iv-consultation/index.md)", "[Structured JSON version](/en/news/articles/2020/02/27/pr2071-malaysia-imf-executive-board-concludes-2020-article-iv-consultation/index.json)", "[Bundle manifest](/en/news/articles/2020/02/27/pr2071-malaysia-imf-executive-board-concludes-2020-article-iv-consultation/bundle-manifest.json)", "Published: February 27, 2020", "Growth has averaged just under 5 percent over the past 5 years.", "Real GDP growth is estimated at 4.5 percent in 2019, driven by domestic demand.", "Headline inflation moderated from an average of 1 percent in 2018 to 0.7 percent in 2019.", "Factors affecting inflation: declining global oil prices, moderating wage growth, and the impact of replacing the GST with the smaller-base SST in 2018.", "Credit growth is moderating.", "Current account surplus is estimated to have increased to 3.5 percent of GDP in 2019, driven by a temporary decline in capital imports and an improvement in the primary income account.", "Growth is expected to remain stable in 2020 and to rebound in the medium term.", "Domestic demand will be the main driver of growth, supported by stable employment and income growth.", "Private investment is projected to gradually pick up as the business environment improves and external uncertainties dissipate.", "Headline inflation is expected to increase to slightly over 2 percent as domestic demand rises, the base effect of the consumption tax regime change vanishes, and fuel subsidies become targeted.", "Current account surplus is expected to narrow to 2.7 percent of GDP as capital imports resume.", "Over the medium term:", "Downside risks predominate on balance:", "Upside risk:", "Directors welcomed stability and progress on the reform agenda; encouraged continued commitment to governance and structural reforms.", "Fiscal policy:", "Monetary and exchange rate policy:", "Financial sector:", "Governance and anti-corruption:", "Structural reforms to raise investment and productivity:", "Nominal GDP (2019): US$364 billion", "Population (2018): 32.4 million", "GDP per capita (2019, current prices): US$11,173", "Poverty rate (2017, national poverty line): 0.4 percent", "Unemployment rate (2019): 3.4 percent", "Adult literacy rate (2018): 95.9 percent", "Main goods exports (share in total, 2018): electrical & electronics (37.7 percent), commodities (15.6 percent), and petroleum products (7.5 percent).", "Selected series (est./proj. where shown):", "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)", "[The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)", "[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)" ], "alternates": { "markdown": "/en/news/articles/2020/02/27/pr2071-malaysia-imf-executive-board-concludes-2020-article-iv-consultation/index.md", "json": "/en/news/articles/2020/02/27/pr2071-malaysia-imf-executive-board-concludes-2020-article-iv-consultation/index.json", "bundleManifest": "/en/news/articles/2020/02/27/pr2071-malaysia-imf-executive-board-concludes-2020-article-iv-consultation/bundle-manifest.json" }, "generatedAtUtc": "2026-09-25T23:29:17.559Z" }