By ALIFAH ZAINUDDIN / Graphic by TMR
Malaysia is projected to post the highest annual growth rate in three years of 5.8% this year, and the momentum is projected to carry right through to 2018, said the World Bank.
The country’s economy rose to 5.6% and 5.8% in the first two quarters and it continued to beat poll forecasts with a growth of 6.2% in the third quarter.
Defying initial expectations of a slowdown, the solid performance is driven by strengthening domestic demand, improved labour market conditions, wage growth and better external demand for manufactured products as well as commodity exports. Higher private and public investment further backed the raise.
The World Bank, in its latest Malaysia Economic Monitor report, said the country’s policy have helped strengthen the economy over the past 20 years, and it anticipates growth to remain resilient at 5.2% next year.
Ulrich Zachau (picture), World Bank director for Malaysia, Thailand and regional partnerships, said continued macroeconomic management and reforms to strengthen people’s skills, as well as competitiveness will help secure the country’s strong economic growth gains especially for lower-income groups.
According to the report, Malaysia’s faster than expected growth creates opportunities for deeper structural reforms that can lead to higher growth. These include policies that enhance productivity and address constraints such as the lack of competition in key markets as well as critical skills deficits.
Meanwhile, Deputy Minister in the Prime Minister’s Department Senator Datuk Seri SK Devamany said having learned many lessons
from the turmoil of 1997 and 1998, the country has been significantly more resilient to external shocks and financial instability in 2017.
“Malaysia learned from the Asian financial crisis. Since then, successive reforms have helped transform the economy and propel it closer to high-income country status,” Devamany said in a statement.
Policy responses carried out by the government then have since been incorporated into toolkits for policy- makers in developing as well as developed countries, even though it was considered unorthodox at the time.
These policies include flexible exchange rate regimes that lower the risk of currency crashes, large international reserves, selective and temporary capital controls to stabilise capital flows, and careful prudential regulation of the domestic financial sector.
“They have proven effective and are widely considered good practice for countries around the world today even while recognising the importance of customising policies to a country’s own specific situation, resources, and institutional capacity,” said the World Bank.