Population 29.038 million
GDP 307.178 US$ billion
@rating
country
Business climate
assessment
| 2010 | 2011 | 2012(e) | 2013(f) | |
|---|---|---|---|---|
|
GDP growth (%)
|
7.2 |
5.1 |
5 |
5 |
|
Inflation (yearly average) (%)
|
1.6 |
3.2 |
1.8 |
3 |
|
Budget balance (% GDP)
|
-2.1 |
-8.4 |
-8.8 |
-7.5 |
|
Current account balance (% GDP)
|
11 |
11 |
5.8 |
3 |
|
Public debt (% GDP)
|
53.1 |
54.9 |
56.4 |
57.4 |
| (e) Estimate (f) Forecast | ||||
STRENGTHS
- Diversified exports
- Dynamic services sector
- Excellent educational system, good infrastructures, high R&D
- Support for investment through development of financial markets and broader access to foreign direct investment
WEAKNESSES
- Economy dependent on foreign demand
- Fiscal revenues highly reliant on gas and oil sector performance
- Very high stock of bank credit granted to the private sector
- Erosion of the economy’s price competitiveness linked to high labour cost
- Persistent regional disparities
Risk assessment
Resilient growth driven by domestic demand
Growth remained stable in 2012 thanks to strong domestic demand. Private consumption benefited from the improved labour market, the rise in civil service salaries and pensions as well as financial support to the poorest households. Investment also grew strongly, particularly in manufacturing and in services directed to domestic demand. Transport, gas, oil and construction were buoyed by public spending particularly on infrastructures. However, exports slowed due to sluggish external demand, especially for electronics, and supply disruptions to the motor vehicle production chain due to the floods in Thailand.
Growth is expected to remain stable in 2013. Household consumption, which represents 50% of GDP, will remain the main engine of growth thanks to the expected rise in the minimum wage in January 2013 and the fall in unemployment. It will continue to support retail sales. Investment will be buoyed by the high production capacity utilisation rate and by the exploration and development of oil and gas fields. Moreover, higher infrastructure spending has been decided under a vast programme of structural reforms launched in the 2011-2015 period. In particular, the construction of a rapid public transport network in Kuala Lumpur for an amount of $11bn is planned. However, electronics exports are likely to slow against the backdrop of recession in the euro zone and weak growth in the United States. On the supply side, services (finance, insurance, tourism) – which represent 60% of GDP – and raw materials (the country being Asia’s largest net oil exporter in and the world’s second biggest exporter of palm oil after Indonesia) are expected to remain strong. In this context, Coface payment experience is expected to remain satisfactory. However, the lack of financial data transparency remains a weakness even though claims collection is effective.
Solid financial position
As to the public finances, the fiscal deficit is expected to remain substantial in 2013 with the continuation of reforms begun under the “economic transformation programme” which aims to double per capita income (to $15000) by 2020. This programme replaces the “New Economic Policy” launched 40 years ago to reduce ethnic inequalities through positive discrimination (quotas in businesses, in education etc.). Moreover, the recent stimulus measures and ongoing petrol subsidies will be a burden on the public finances. Public debt will therefore reach a relatively high level in 2013, above the Asian average (32% of GDP) and that of emerging countries (33.8% of GDP). In this context sovereign risk needs to be monitored.
Meanwhile, the current account surplus is expected to decline further in 2013. Imports are expected to grow more quickly than exports because of strong domestic demand and sluggish European and American demand. Nevertheless, Malaysia is well able to withstand sudden capital flight thanks to large foreign exchange reserves (6 months of exports).
Finally, the banking sector has proved resilient to the crisis. It remains well capitalised, sufficiently liquid, with little external debt and few non-performing loans.
As to politics, current policies are expected to continue after the 2013 general elections
In 2011-2102, the coalition government – the Barisan Nasional (BN), led by Najib Razak - had to contend with stronger opposition from the Pakatan Rakyat alliance as attested by the BN’s setback in local elections in several federal states. However, the BN retains a simple majority in parliament, allowing effective decision-making and adoption of reforms. So, although the general elections planned for April 2013 had to be brought forward, the BN is likely to win thanks to the vast structural reforms undertaken. Economic policy consistency and continuity is likely, therefore, to be maintained.
