| Date - Field | Malaysia - Economy - overview |
2008 January
Economy - overview | Malaysia, a middle-income country, has transformed itself since the 1970s from a producer of raw materials into an emerging multi-sector economy. Since coming to office in 2003, Prime Minister ABDULLAH has tried to move the economy farther up the value-added production chain by attracting investments in high technology industries, medical technology, and pharmaceuticals. Kuala Lumpur is also trying to boost domestic demand to wean the economy off of its dependence on exports. Nevertheless, exports - particularly of electronics - continue to drive the economy. As an oil and gas exporter, Malaysia has profited from higher world energy prices, although the rising cost of domestic gasoline and diesel fuel forced Kuala Lumpur to reduce government subsidies. Malaysia "unpegged" the ringgit from the US dollar in 2005 and the currency appreciated 6% per year against the dollar in 2006-07. Although this has helped to hold down the price of imports, inflationary pressures began to build in 2007. Healthy foreign exchange reserves and a small external debt greatly reduce the risk that Malaysia will experience a financial crisis over the near term similar to the one in 1997. The government presented its five-year national development agenda in April 2006 through the Ninth Malaysia Plan, a comprehensive blueprint for the allocation of the national budget from 2006-10. With national elections expected within the year, ABDULLAH has unveiled a series of ambitious development schemes for several regions that have had trouble attracting business investment. Real GDP growth has averaged about 6% per year under ABDULLAH, but regions outside of Kuala Lumpur and the manufacturing hub Penang have not fared as well. |
2007 January
Economy - overview | Malaysia, a middle-income country, transformed itself from 1971 through the late 1990s from a producer of raw materials into an emerging multi-sector economy. Growth was almost exclusively driven by exports - particularly of electronics. As a result, Malaysia was hard hit by the global economic downturn and the slump in the information technology (IT) sector in 2001 and 2002. GDP in 2001 grew only 0.5% because of an estimated 11% contraction in exports, but a substantial fiscal stimulus package equal to US $1.9 billion mitigated the worst of the recession, and the economy rebounded in 2002 with a 4.1% increase. The economy grew 4.9% in 2003, notwithstanding a difficult first half, when external pressures from Severe Acute Respiratory Syndrome (SARS) and the Iraq War led to caution in the business community. Growth topped 7% in 2004 and 5% per year in 2005-06. As an oil and gas exporter, Malaysia has profited from higher world energy prices, although the rising cost of domestic gasoline and diesel fuel forced Kuala Lumpur to reduce government subsidies, contributing to higher inflation. Malaysia "unpegged" the ringgit from the US dollar in 2005 and the currency appreciated 6% against the dollar in 2006. Healthy foreign exchange reserves and a small external debt greatly reduce the risk that Malaysia will experience a financial crisis over the near term similar to the one in 1997. The economy remains dependent on continued growth in the US, China, and Japan - top export destinations and key sources of foreign investment. |
2006 January
Economy - overview | Malaysia, a middle-income country, transformed itself from 1971 through the late 1990's from a producer of raw materials into an emerging multi-sector economy. Growth was almost exclusively driven by exports - particularly of electronics. As a result, Malaysia was hard hit by the global economic downturn and the slump in the information technology (IT) sector in 2001 and 2002. GDP in 2001 grew only 0.5% due to an estimated 11% contraction in exports, but a substantial fiscal stimulus package equal to US $1.9 billion mitigated the worst of the recession and the economy rebounded in 2002 with a 4.1% increase. The economy grew 4.9% in 2003, notwithstanding a difficult first half, when external pressures from SARS and the Iraq War led to caution in the business community. Growth topped 7% in 2004. Healthy foreign exchange reserves, low inflation, and a small external debt are all strengths that make it unlikely that Malaysia will experience a financial crisis similar to the one in 1997. The economy remains dependent on continued growth in the US, China, and Japan, top export destinations and key sources of foreign investment. |
2005 January
Economy - overview | Malaysia, a middle-income country, transformed itself from 1971 through the late 1990's from a producer of raw materials into an emerging multi-sector economy. Growth was almost exclusively driven by exports - particularly of electronics. As a result, Malaysia was hard hit by the global economic downturn and the slump in the information technology (IT) sector in 2001 and 2002. GDP in 2001 grew only 0.5% due to an estimated 11% contraction in exports, but a substantial fiscal stimulus package equal to US $1.9 billion mitigated the worst of the recession and the economy rebounded in 2002 with a 4.1% increase. The economy grew 4.9% in 2003, notwithstanding a difficult first half, when external pressures from SARS and the Iraq War led to caution in the business community. Growth topped 7% in 2004. Healthy foreign exchange reserves, low inflation, and a small external debt are all strengths that make it unlikely that Malaysia will experience a financial crisis similar to the one in 1997. The economy remains dependent on continued growth in the US, China, and Japan, top export destinations and key sources of foreign investment. |
2004 January
Economy - overview | Malaysia, a middle-income country, transformed itself from 1971 through the late 1990s from a producer of raw materials into an emerging multi-sector economy. Growth was almost exclusively driven by exports - particularly of electronics. As a result Malaysia was hard hit by the global economic downturn and the slump in the information technology (IT) sector in 2001 and 2002. GDP in 2001 grew only 0.5% due to an estimated 11% contraction in exports, but a substantial fiscal stimulus package equal to US $1.9 billion mitigated the worst of the recession and the economy rebounded in 2002 with a 4.1% increase. The economy grew 4.9% in 2003, notwithstanding a difficult first half, when external pressures from SARS and the Iraq War led to caution in the business community. Healthy foreign exchange reserves and a relatively small external debt make it unlikely that Malaysia will experience a crisis similar to the one in 1997, but the economy remains vulnerable to a more protracted slowdown in Japan and the US, top export destinations and key sources of foreign investment. The Malaysian ringgit is pegged to the dollar, and the Japanese central bank continues to intervene and prop up the yen against the dollar. |
2003 January
Economy - overview | Malaysia, a middle-income country, transformed itself from 1971 through the late 1990s from a producer of raw materials into an emerging multi-sector economy. Growth was almost exclusively driven by exports - particularly of electronics - and, as a result Malaysia was hard hit by the global economic downturn and the slump in the Information Technology (IT) sector in 2001. GDP in 2001 grew only 0.5% due to an estimated 11% contraction in exports, but a substantial fiscal stimulus package mitigated the worst of the recession and the economy rebounded in 2002. Healthy foreign exchange reserves and relatively small external debt make it unlikely that Malaysia will experience a crisis similar to the one in 1997, but the economy remains vulnerable to a more protracted slowdown in Japan and the US, top export destinations and key sources of foreign investment. |
2002 January
Economy - overview | Malaysia, a middle income country, transformed itself from 1971 through the late 1990s from a producer of raw materials into an emerging multi-sector economy. Growth is almost exclusively driven by exports - particularly of electronics - and, as a result Malaysia was hard hit by the global economic downturn and the slump in the Information Technology (IT) sector in 2001. GDP in 2001 grew only 0.3% due to an estimated 11% contraction in exports, but a substantial fiscal stimulus package has mitigated the worst of the recession and the economy is expected to grow by 2% to 3% in 2002 as the world economy rebounds. Kuala Lumpur's healthy foreign exchange reserves and relatively small external debt make it unlikely that Malaysia will experience a crisis similar to the crisis of 1997, but the economy remains vulnerable to a more protracted downturn in the US and Japan, top export destinations and key sources of foreign investment. |
2001 January
Economy - overview | GDP grew at 8.6% in 2000, mainly on the strength of double-digit export growth and continued government fiscal stimulus. As an oil exporter, Malaysia also benefited from higher petroleum prices. Higher export revenues allowed the country to register a current account surplus, but foreign exchange reserves have been declining - from a peak of $34.5 billion in April 2000 to $29.7 billion by December - as foreign investors pulled money out of the country. Despite this development, Kuala Lumpur is unlikely to abandon its currency peg soon. An economic slowdown in key Western markets, especially the United States, and lower world demand for electronics products will slow GDP growth to 3%-6% in 2001, according to private forecasters. Over the longer term, Malaysia's failure to make substantial progress on key reforms of the corporate and financial sectors clouds prospects for sustained growth and the return of critical foreign investment. |
2000 January
Economy - overview | Malaysia made a quick economic recovery in 1999 from its worst recession since independence in 1957. GDP grew 5%, responding to a dynamic export sector, which grew over 10% and fiscal stimulus from higher government spending. The large export surplus has enabled the country to build up its already substantial financial reserves, to $31 billion at yearend 1999. This stable macroeconomic environment, in which both inflation and unemployment stand at 3% or less, has made possible the relaxation of most of the capital controls imposed by the government in 1998 to counter the impact of the Asian financial crisis. Government and private forecasters expect Malaysia to continue this trend in 2000, predicting GDP to grow another 5% to 6%. While Malaysia's immediate economic horizon looks bright, its long-term prospects are clouded by the lack of reforms in the corporate sector, particularly those dealing with competitiveness and high corporate debt. |
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This page was last updated on 25 June, 2008 |
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