After a robust, domestic-led growth in 2012, Malaysia’s economy is expected to expand by about 5 percent this year, accompanied by low unemployment and subdued inflation, said the International Monetary Fund (IMF).
In its regular report on the state of the country’s economy, the IMF said that Malaysia continued the strong recovery that began in 2010 following the global crisis, and that it expects its economy to continue to perform well over the medium term.
“This growth has been fueled by the country’s increasing reliance on domestic demand,” the IMF said in a statement. “Higher spending by households, firms, and government on consumer and capital goods has offset weak exports to Europe and the rest of the world.”
Consumption has been supported by low interest rates, a strong labor market, and fiscal transfers to households.
The growing trade in consumer goods among countries from the Association of Southeast Asian Nations is also helping shield Malaysia’s economy from the downturn in many other parts of the world, it added.
Private and public investments have been supported by low interest rates and state projects under the government’s Economic Transformation Program, particularly in oil, gas, and infrastructure.
The rebalancing of Malaysia’s economy toward greater domestic demand has led to a significant deterioration in Malaysia’s external current account balance—to a surplus of about 6 percent of GDP in 2012, compared to 11 percent in 2011.
The report also said skillful macroeconomic management has underpinned the country’s strong, noninflationary growth despite the unsettled global conditions.
The conclusion of the 2012 Financial Sector Assessment Program—undertaken by the IMF and World Bank—found Malaysia’s financial sector to be robust, and underpinned by high levels of capital and a strong supervisory and regulatory framework.
Malaysia aims to move up the international value chain and turn itself into a high-income nation by 2020.