KUALA LUMPUR, May 19, 2015:
Malaysia is on track to achieve its goals of becoming a high income nation by 2020, said ANZ Research in a recent report.
The Australian bank’s economists Weiwen Ng and Glenn Maguire said Malaysia had made rapid gains, with gross national income per capita having risen from just US$300 (RM1,071) in 1963 to US$10,808 last year.
The report notes that Malaysia with its structural reforms such as the Economic Transformation Programme (ETP) could help it escape the “middle income trap” which plagues many Asian nations.
“With a focus of upgrading and diversifying her industrial base, Malaysia is on the cusp of joining Singapore in the high income nation bracket.
“The successful development path of these two economies will likely form the template that other Asean economies will follow in their own transformations.”
ANZ Research said urbanisation has been a key element in Malaysia’s growth, a self-reinforcing positive relationship that has seen the nation become Asean’s third most urbanised behind Singapore and Brunei.
Among the RM1.4 trillion of new investments planned, large-scale infrastructure projects are already underway – including the Pengerang Integrated Complex, KL-Singapore high speed rail and the Greater Kuala Lumpur transportation projects.
Since the ETP’s launch, some RM775 billion of investments have been approved, with private investment climbing from 12.8% to 17.5% of GDP and inward foreign direct investment nearly doubling to an annual average of RM9.1 billion.
ANZ Research also said the removal of fuel subsidies and lower oil prices together with the Goods and Services Tax (GST) introduction should also free up fiscal space of around 2% of GDP, which could be made available for infrastructure spending.
Last Friday, Bank Negara Malaysia (BNM) reported a 5.6% increase in GDP for the three months through March compared to a year earlier, slightly ahead of economists’ forecasts of a 5.5% GDP gain but below the previous quarter’s 5.7% rise.
Exports dropped by 0.6% in the March quarter from a year earlier, but private investment surged 11.7% and private consumption gained 8.8% ahead of the start of GST.
Malaysia’s current account surplus also expanded in the first quarter, rising to RM10 billion compared to a revised RM5.7 billion in the previous quarter, again beating analysts’ forecasts.
BNM governor Tan Sri Zeti Akhtar Aziz said the economy “is expected to remain on a steady growth path,” with domestic demand aided by lower oil prices.
“Investment activity is projected to remain resilient with continued capital spending by both private and public sectors.
“The recovery in global growth while remaining moderate, will provide support to manufactured exports, although lower commodity prices will likely weigh down on overall exports.”
The International Monetary Fund (IMF) too had said Malaysia’s economy, currently the world’s 35th largest, would expand by 4.8% this year and by 4.9% in 2016, down from the 6% growth recorded in 2014, hit by falling prices of commodities such as natural gas and palm oil and the new consumption tax.
IMF first deputy managing director David Lipton said: “With a sustained effort to pursue further reforms, Malaysia’s income level in 2040 could surpass that (high-income) goal, and essentially converge to the UK.”