The Malaysian economy has proven to be resilient at a time of global uncertainty in the OECD area. Over the medium term, however, there are important long-standing structural issues that may affect its march towards developed country status by 2020.

Structural problems affecting the education system continue to be a stumbling block in efforts to improve productivity and to attract the value-adding high-tech industries that require skilled labour. SMEs, which contribute so heavily to employment, are especially hard hit by difficulties in finding skilled labour. While the fiscal balance continues to improve, uncertainties in the external environment, coupled with the failure so far of fiscal reforms to rein in spending on subsidies or to implement a goods and services tax (GST), raise questions as to whether the improvement in public finances can be sustained.

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