Malaysia has been steadily climbing the economic ladder in Southeast Asia, and now it’s on the brink of a major milestone: becoming a high-income nation.
The World Bank estimates this could happen by 2028, but there’s a chance it might happen sooner. According to Malaysia’s lead economist, Apurva Sanghi, the nation could hit this goal by 2027 if the ringgit keeps its current strength, reported FMT.
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What’s boosting Malaysia’s economy?
- Exchange rate advantage: The World Bank’s prediction is based on Malaysia maintaining a growth rate of 4.3% and an exchange rate of 4.54 (US dollar to ringgit). However, if the rate stays around 4.20, Malaysia could reach high-income status a year early.
- Caution ahead: Sanghi reminds us that reaching high-income status isn’t the endgame—it doesn’t guarantee long-term economic stability. Risks like economic downturns are still on the table.
Higher growth expected in 2024
- The World Bank recently bumped up Malaysia’s GDP growth forecast for 2024, raising it from 4.3% to 4.9%.
- This change is thanks to improving global conditions and positive developments at home, including:
- Political stability: This has been a key factor in boosting business confidence.
- Investment-friendly policies: These are attracting more investments, which drive economic growth.
Malaysia’s standout performance
- Beating pre-pandemic levels: Malaysia’s per capita output is now 12% higher than before Covid-19, putting it ahead of neighbouring countries.
- A strong domestic market: Consumer confidence is growing, and manufacturing and services are seeing positive trends.
What’s next? Subsidy reforms on the table
Sanghi highlighted that Malaysia might have to adjust its subsidies for RON95 petrol. For the reform to work, he says, three things are crucial:
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- Timing: Careful planning, especially with geopolitical tensions on the rise.
- Gradual price changes: A smooth transition to avoid public backlash.
- A clear message: The government needs to explain why these changes are necessary to get public support.
