Malaysia’s recent growth has moderated somewhat in the face of severe global headwinds but has remained robust. Stepping up structural reforms to increase productivity and inclusiveness would also improve the sustainability of growth over the medium run and help achieve Malaysia’s ambition to become a high-income country around 2020.

Overview of the Economic Assessment of Malaysia

Boosting productivity key to fostering inclusive growth, Press release

Blog: Successful macro transformation in Malaysia, but challenges remain

Blog: Boosting productivity is key for Malaysia to attain high-income-country status

Growth has been resilient

‌Malaysia has sustained rapid average growth of over 6.4% per year since 1970. In recent years, growth has moderated somewhat in the face of severe global headwinds but has remained robust. The economy is projected to grow at over 4% per year in the course of 2016-17. Monetary and fiscal policy should remain prudent to help sustain growth and maintain the resilience of the economy to shocks. Stepping up structural reforms to increase productivity and inclusiveness would also improve the sustainability of growth over the medium run and help achieve Malaysia’s ambition to become a high-income country around 2020. The effective implementation of the reforms featured in the 11th Malaysia Plan (2016-20) will be critical but challenging.

Boosting productivity growth is essential to raise overall living standards

Labour productivity growth in the past 15 years has been below that of regional competitors, partly due to slower capital deepening. It has also been held back by a declining share of skilled workers in the labour force and insufficient technology diffusion and innovation. Reforms to improve the quality of education and skills training, promote innovation and the adoption of information technology are key. Enhancing the regulatory frameworks for competition and small and medium-sized enterprises, facilitating economic integration with the other countries of the region, raising public sector productivity and improving labour market functioning would also boost productivity.

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Growth must continue to become more inclusive

Income inequality has fallen over the past several decades as Malaysia has pursued a comparatively equitable development path. Absolute poverty has been largely eliminated and income inequality has gradually declined. The focus is now shifting to reducing relative inequality and to sustainable improvements in individual and societal well-being. This calls for reforms with respect to access to quality education, social protection, labour force participation of women and older persons, healthcare, pension adequacy and the inclusiveness of the tax and transfer system.

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For further information please contact the Malaysia Desk at the OECD Economics Department.This first OECD Economic Assessment of Malaysia was prepared by Hidekatsu Asada, Stewart Nixon and Thomas Chalaux, under the supervision of Vincent Koen. It benefited from contributions at various stages by Mohamed Rizwan Habeeb Rahuman, Abu Zeid Mohd Arif, Faisal Naru, Lynn Robertson, Ruben Maximiano, Massimo Geloso Grosso, Kazuhiro Sugie, Gernot Hutschenreiter and Philippe Larrue. Administrative assistance was provided by Mercedes Burgos and Sisse Nielsen.

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