## IMF Staff Completes 2023 Article IV Mission to Malaysia

_IMF News, March 21, 2023_

## Source details

**Canonical URL:** [IMF Staff Completes 2023 Article IV Mission to Malaysia](https://www.imf.org/en/news/articles/2023/03/20/pr2380-imf-staff-completes-2023-article-iv-mission-to-malaysia)

## Other formats

- [Markdown version](/en/news/articles/2023/03/20/pr2380-imf-staff-completes-2023-article-iv-mission-to-malaysia/index.md)
- [Structured JSON version](/en/news/articles/2023/03/20/pr2380-imf-staff-completes-2023-article-iv-mission-to-malaysia/index.json)
- [Bundle manifest](/en/news/articles/2023/03/20/pr2380-imf-staff-completes-2023-article-iv-mission-to-malaysia/bundle-manifest.json)

## Bibliographic details
- Published: March 21, 2023

---

### Mission summary and context
- IMF team led by Mr. Lamin Leigh conducted discussions for the 2023 Article IV Consultation with Malaysian authorities and other stakeholders during March 8-20, 2023.
- Press Release No. 23/80.
- End-of-Mission press releases convey preliminary findings after a visit; the views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.

### Key findings
- Growth reached 8.7 percent in 2022, driven by pent-up domestic demand following the reopening of the economy in April 2022 and resilient export performance.
- Staff estimates the output gap to have closed in 2022.
- Recovery remains uneven: agriculture, mining, and particularly construction sectors remain below pre-pandemic levels.
- Headline inflation was on the rise for most of 2022, reaching 3.3 percent for the year, despite record spending on subsidies.
- Inflation expectations remained well anchored.

### Projections and risks
- Growth is projected to moderate to about 4½ percent in 2023, driven by external headwinds.
- Inflation is projected to remain elevated at about 3¼ percent, with likely persistence in core inflation amid a positive output gap and evidence of a build-up of demand-side pressures.
- Downside risks are mostly external, including:
  - an abrupt global slowdown; and
  - larger than envisaged monetary policy tightening by major central banks.

### Policy recommendations
- Fiscal policy
  - Implement a gradual fiscal consolidation strategy, as set out in the 2023 Budget, to rebuild buffers, put debt on a downward path, and reduce fiscal risks.
  - Fiscal consolidation should be credibly underpinned by high-quality and durable revenue measures to create space for critical investment needs and targeted transfers to low-income households and to buttress market confidence.
  - Welcome authorities’ commitment to fiscal reforms, including:
    - upcoming tabling of the Fiscal Responsibility Act;
    - planned subsidy reform; and
    - plans to develop a medium-term revenue strategy.
- Monetary policy and financial stability
  - Monetary policy should tighten further to bring the currently accommodative stance to neutral to keep inflation contained and expectations anchored.
  - Continued clear communication of the rationale for Bank Negara Malaysia policy decisions is critical in a rapidly evolving and highly uncertain environment.
  - Enhance monitoring of household and corporate balance sheets in the current environment of higher interest rates and weaker growth momentum.
  - Expand the macroprudential toolkit to support these efforts.
  - Exchange rate flexibility should be the first line of defense against external shocks.
- Structural reforms
  - Forge ahead with implementing the concerted policy agenda set out in the Twelfth Malaysia Plan and the 2023 Budget, focusing on:
    - enhancing broad-based productivity drivers and inclusive growth;
    - addressing climate change;
    - promoting digitalization;
    - enhancing governance; and
    - strengthening anti-corruption reforms.

### Closing remarks
- The IMF team thanked officials of the Government of Malaysia and Bank Negara Malaysia, other public institutions, and representatives from the private sector and civil society for productive discussions.

*IMF Staff Completes 2023 Article IV Mission to Malaysia — Press Release No. 23/80, March 20, 2023.*

---


## References

- [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/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2023/03/20/pr2380-imf-staff-completes-2023-article-iv-mission-to-malaysia_