Malaysia, a middle-income country, has transformed itself since the 1970s from a producer of raw materials into an emerging multi-sector economy. Under current Prime Minister Najib Tun Razak, Malaysia is attempting to achieve high-income status by 2020 and to move farther up the value-added production chain by attracting investments in Islamic finance, high technology industries, biotechnology, and services.
Najib Tun Razak's Economic Transformation Program is a series of projects and policy measures intended to accelerate the country's economic growth. The government has also taken steps to liberalise some services sub-sectors. Malaysia is vulnerable to a fall in world commodity prices or a general slowdown in global economic activity.The current administration is continuing their efforts to boost domestic demand and reduce the dependence on exports. Nevertheless, exports - particularly of electronics, oil and gas, palm oil, and rubber - remain a significant driver of the economy.
Gross exports of goods and services make up more than 80% of the GDP. The oil and gas sector supplied about 29% of government revenue in 2014. As an oil and gas exporter, Malaysia has previously profited from higher world energy prices, although the rising cost of domestic gasoline and diesel fuel, combined with sustained budget deficits, has forced Kuala Lumpur to begin to address fiscal shortfalls, through initial reductions in energy and sugar subsidies and the announcement of the 2015 implementation of a 6% goods and services tax. Falling global oil prices in the second half of 2014 have strained government finances, shrunk Malaysia’s current account surplus and put downward pressure on the ringgit.
The current economic expansion is expected to remain robust in 2018 and 2019. Economic growth should broaden as contributions from the external sector gain traction, while domestic demand is expected to be propelled by vibrant private consumption and higher investment spending. The GDP is predicted to expand a healthy 4.9% in 2018. For 2019, the panel foresees the economy growing at a pace of 4.6%.
After being the worst performing stock market in Southeast Asia in 2017 with merely a 6.7% return. However the outlook for the equity market in 2018 given that there has been a recovery in corporate earnings and share price movements since the second half of 2016 and the momentum continued throughout 2017. The local equity market is projected to reach a new high of 1,900 points in 2018, with the banking stocks to be the growth driver.
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