KUALA LUMPUR – Malaysia has been hailed as a stand-out in the region and a model of resilience after outpacing China’s GDP growth in the last quarter.
Malaysia’s GDP grew by 5.3%, outpacing China’s 4.6%, while the International Monetary Fund (IMF) forecasted that Malaysia will continue to outgrow China on average over the next five years, Bloomberg noted.
While China is introducing new economic-support measures to achieve its 2024 growth target of 5%, it said Malaysia appeared to have found a winning formula, in contrast with neighbouring nations such as Thailand, which has been hindered by political instability, and Indonesia, a republic struggling to match Malaysia’s income levels.
This momentum, said the business news wire in its newsletter published on November 23, could be either negatively or positively affected by Prime Minister Datuk Seri Anwar Ibrahim’s plans, which hinges on how Malaysia copes with economic storms given uncertainty over US president-elect Donald Trump’s incoming administration.
While Malaysia is no stranger to its own political volatilities, the nation’s economy has managed to remain robust under Anwar’s leadership, which recently hit the two-year mark, Bloomberg said.
Anwar has steered the country through a carefully constructed strategy which includes long-term efforts to attract foreign investments, maintaining price stability through a strong central bank and by implementing measures like price controls to support consumer spending.
One of Anwar’s key objectives is to transform Malaysia into an artificial intelligence hub, with the goal having already drawn major industry players such as Microsoft Corp., Amazon.com Inc. and Google parent Alphabet Inc, Bloomberg noted.
These investments are a continuation of Malaysia’s legacy in attracting tech firms, a strategy which can be traced back to the 1970s when the nation established a free-trade zone long before China’s Deng Xiaoping adopted similar measures.
Penang, in particular, has been a hotspot for tech firms, including a major Intel Corp. facility, while Kedah hosts the likes of Infineon Technologies AG as Johor benefits from its proximity to Singapore, which has also boasted a noteworthy manufacturing base over the decades.
This influx of foreign interest in Malaysia contrasts with China’s experience, where recent crackdowns on both domestic and foreign private-sector companies have led to a decline in investments.
However, while Malaysia has made significant strides, uncertainties loom over the potential instabilities Trump’s policies could introduce. Additionally domestic challenges could come in the form of disagreements with states over resources, which could pose economic stability risks.
Nonetheless, Malaysia’s economy enjoys resilient domestic consumption, which Bank Negara Malaysia Governor Datuk Seri Abdul Rasheed Ghaffour identified as a key growth driver, along with unemployment rates returning to pre-pandemic levels.
While government policies such as targeted cash aid for low-income households and boosting tourist spending are significant measures, the government also plans to increase civil servants’ salaries and up the minimum wage for the private sector in the coming year.
Subsidies for basic goods such as fuel, sugar, eggs and electricity have also helped to stabilise consumer confidence, even though they come at a significant cost to public finances.
On the other hand, Malaysia is also planning to implement targeted subsidies for RON95 petrol, potentially putting pressure on both inflation and consumer sentiments.
Despite challenges, Malaysia is approaching its economic future from a “position of strength”, the central bank governor was quoted as saying. Noting that the nation’s growth is mostly from domestic demand, he highlighted that Malaysia has a highly diversified economy and trade partners. – November 25, 2024
