The World Bank’s Malaysia Economic Monitor report issued on Thursday said the 5.8% on-year growth would be the country’s highest annual growth rate since 2014.
“Accelerated growth has been fueled by strengthening domestic demand, improved labor market conditions, and wage growth, as well as improved external demand for Malaysia’s manufactured products and commodity exports. Capital expenditure has also increased due to higher private and public investment,” it said.
According to the report, Malaysia’s stronger than expected growth creates opportunities for deeper structural reforms that can lead to higher growth.
“These reforms include policies that enhance productivity and address constraints such as a lack of competition in key markets and critical skills deficits. Such policies will enable access to more remunerative employment and real income gains for lower-income families,” it said.
The World Bank report said its edition of the Malaysia Economic Monitor included a special focus on the Asian Financial Crisis, 20 years on, its impact, management, and lessons learned in Malaysia, the region, and globally.
“Malaysia’s progress over the last 20 years owes much to the sound policies being adopted during and since the Asian Financial Crisis,” said Ulrich Zachau, World Bank director for Malaysia, Thailand, and Regional Partnerships.
“Continued sound macroeconomic management and further reforms to strengthen people’s skills, competitiveness, and equal opportunities will help secure gains from Malaysia’s robust economic growth for all its people, especially low-income and lower-income families, through access to more and better jobs,” he said.
Meanwhile, Deputy Minister in the Prime Minister’s Department, Senator Datuk Seri S. K. Devamany pointed out that in 2017, Malaysia was significantly more resilient to external shocks and financial instability, having learned many lessons from the turmoil of 1997-98.
“Malaysia learned from the experience of the Asian Financial Crisis, and in the years since, successive reforms have helped transform the economy and propel it closer to high-income country status.”
Key policy responses to the crisis in Malaysia, while considered unorthodox at the time, have since been incorporated into toolkits for policymakers in developing as well as developed countries.
Such policies include flexible exchange rate regimes that lower the risk of currency crashes, large international reserves, selective and temporary capital controls to stabilize capital flows, and careful prudential regulation of the domestic financial sector.
They have proven effective and today are widely considered good practice for countries around the world, even while recognising the importance of customising policies to a country’s own specific situation, resources, and institutional capacity.