In this page: Economic Outline | Political Outline | COVID-19 Country Response
For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.
Malaysia is the 4th largest economy of South East Asia and has continued to perform strongly in recent years, due to a strong global demand for electronics, increased demand for commodities, such as oil and gas, an improving labour market, a pro-cyclical budget and ample infrastructure spending. However, the government's declining expenditure as well as lower public and private investments already reduced economic growth to 4.4% in 2019. Due to the COVID-19 pandemic, the growth has been sharply reversed to -5.5% in 2020 but rebounded at 3.1% in 2021 and 5.4% in 2022. The IMF's latest forecast (October 2022) is expecting another strong growth at 4.4% in 2023 and 4.9% in 2024, subject to the post-pandemic global economic recovery.
During the past few years, a political crisis, low oil and commodity export prices and the slowdown in China have deeply affected Malaysia’s economy, putting pressure on the country's finances. Malaysia has the highest debt level in the region, estimated at 69.6% of GDP in 2022 (IMF, October 2022), with spending increasing faster than GDP. Debt levels are expected to remain stable in 2023 and 2024 at 70%.
Due to the economic crisis caused by the Covid-19 pandemic, Malaysia recorded a Government Budget deficit equal to -3.5% in 2020 and -6.5% in 2021 of the country's Gross Domestic Product (Ministry of Finance Malaysia, 2022). It remained at 4.1% in 2022 and is forcasted to stabilised at -3.1% in 2023 and 2024. Future budget measures include a more inclusive economy for the population: increased cash support for low-income families, extra funds for affordable housing projects, more entrepreneurship programmes to elevate lower-income groups and an increase in Malaysia’s competitiveness. The government faces various challenges, including the weakening of the Malaysian currency, the drop in oil prices (since oil revenues account for 30% of state revenue) and the fall in commodity export prices. Inflation went negative in 2020 at -1.1% and then reached 2.5% in 2021 and 3.2% in 2022. It is expected to stabilise at 2.8% in 2023 and 2024 (IMF, October 2022).
Malaysia is on track to achieving high-income status by 2024. The country has one of the highest standards of living in Southeast Asia and a low unemployment rate estimated at 4.5% in 2022 (IMF, October 2022), but the youth unemployment rate is more than triple (15.6%, World Bank, 2022) and rural youth doesn't count statistically. The 11th Malaysia Plan charts a path toward advanced economy status and greater inclusion, through a range of development issues such as equity, inclusiveness, environmental sustainability, human capital development, and infrastructure. Less than 1% of Malaysian households live in extreme poverty. The IMF expects the unemployment rate to stabilise at 4.3% in 2023 and 4.2% in 2024.
In 2023, the country’s most immediate challenge will be to navigate the volatile international context, due to the persistent health and economic effects of a global pandemic and a war in Europe, a cost-of-living crisis caused by persistent and broadening inflation pressures, and the slowdown in China.
Main Indicators | 2020 | 2021 | 2022 (E) | 2023 (E) | 2024 (E) |
---|---|---|---|---|---|
GDP (billions USD) | 337.61 | 373.03 | 407.92 | 447.03 | 481.80 |
GDP (Constant Prices, Annual % Change) | -5.5 | 3.1 | 8.7 | 4.5 | 4.5 |
GDP per Capita (USD) | 10,361 | 11,450 | 12,364 | 13,382 | 14,250 |
General Government Balance (in % of GDP) | -3.9 | -4.9 | -5.5 | -5.1 | -4.8 |
General Government Gross Debt (in % of GDP) | 67.7 | 69.3 | 66.3 | 67.0 | 67.1 |
Inflation Rate (%) | -1.1 | 2.5 | 3.4 | 2.9 | 3.1 |
Unemployment Rate (% of the Labour Force) | 4.5 | 4.7 | 3.8 | 3.6 | 3.5 |
Current Account (billions USD) | 14.07 | 14.17 | 10.77 | 11.66 | 13.24 |
Current Account (in % of GDP) | 4.2 | 3.8 | 2.6 | 2.6 | 2.7 |
Source: IMF – World Economic Outlook Database, Latest data available.
Note : (E) Estimated data
Since gaining its independence in 1957, Malaysia has successfully diversified its economy from agriculture and commodity-based to solid manufacturing and service sectors. It had a labor force of 16.1 million people out of a 32.97 million population in 2022. Agriculture employed around 10% of Malaysians in 2022 and contributed to 9.6% of GDP (World Bank, 2023). Malaysia is the second main producer of palm oil and tropical wood, and the fifth largest exporter of rubber. The country has successfully developed its economy based on raw materials and has significant reserves of oil, gas, copper and bauxite.
Industry contributed to around 37.8% of GDP and employed nearly 27% of the active population in 2022 (World Bank, 2023). Malaysia is one of the world's largest exporters of semi-conductor devices, electrical goods and appliances, and the government has ambitious plans to make the country a key producer and developer of high-tech products, including software. Malaysia is a major outsourcing destination for components manufacturing, after China and India. The country has attracted significant foreign investment, which has played a major role in the transformation of its economy.
The service sector employs the majority of the population (over 63% in 2022) and accounts for 52.6% of GDP (World Bank, 2023) which is due mainly to healthcare services, transport, distributive trade and tourism. Tourism was the third biggest contributor to Malaysia’s GDP, after manufacturing and commodities, with over 7% of GDP and 26.1 million foreign tourists in 2019, according to Tourism Malaysia. Over the years, Malaysia has become one of Southeast Asia's major tourist destinations, and since 2020 the country was waiting for the world's borders to open again to international travel. The borders are now open and tourists are slowly making their way to Malaysia in 2023.
Global economic activity is experiencing a broad-based and sharper-than-expected slowdown, with inflation higher than seen in several decades. The cost-of-living crisis, tightening financial conditions in most regions, Russia’s invasion of Ukraine, and the lingering COVID-19 pandemic all weigh heavily on the outlook. Global growth is forecast to slow from 6.0 percent in 2021 to 3.2 percent in 2022 and 2.7 percent in 2023, the weakest growth profile since 2001 except for the global financial crisis and the acute phase of the COVID-19 pandemic. Global inflation is forecast to rise from 4.7 percent in 2021 to 8.8 percent in 2022 but to decline to 6.5 percent in 2023 and to 4.1 percent by 2024 (International Monetary Fund - IMF, 2023). The impact of the 2022 world events appears to have affected both sides of most sectors and markets in this country for the third year in a row - demand disruptions having run up against supply problems - making the short-term outlook uncertain for agriculture, industry and service sectors.
Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
---|---|---|---|
Employment By Sector (in % of Total Employment) | 10.3 | 27.0 | 62.7 |
Value Added (in % of GDP) | 9.6 | 37.8 | 51.6 |
Value Added (Annual % Change) | -0.2 | 5.6 | 1.9 |
Source: World Bank, Latest data available.
Find more information about your business sector on our service Market Reports.
The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.
Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation
The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.
Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024
See the country risk analysis provided by Coface.
Barisan Nasional:
- United Malays National Organisation (UMNO): right-wing, known for being a major proponent of Malaysian nationalism
- Malaysian Chinese Association (MCA): right-wing, represents Malaysian Chinese contingency
- Malaysian Indian Congress (MIC): right-wing
Pakatan Harapan:
- Democratic Action Party (DAP): centre-left, social democracy
- People's Justice Party (PKR): centre-left
- Malasyan United Indigenous (BERSATU): centre-right, nationalism
- National Trust Party (AMANAH): centre-left, Islamic modernism
Other parties:
- Parti Gerakan Rakyat Malaysia (Gerakan): centre
- Parti Pesaka Bumiputera Bersatu (PBB): right-wing
- Parti Rakyat Sarawak (PRS): centre
- Parti Bersatu Sabah (PBS): centre, multi-racial
- Sarawak Progressive Democratic Party (SPDP)
- United Pasok Momogun Kadazandusum Organisation (UPKO): right-wing
- Sarawak United People's Party (SUPP): centre
- Parti Bersatu Rakyat Sabah (PBRS): nationalist-oriented
The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).
The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.
Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House
Any Comment About This Content? Report It to Us.
© eexpand, All Rights Reserved.
Latest Update: September 2023