Economic Outline

Economic Indicators

Malaysia has successfully transformed its economy, shifting from an agriculture and commodity-based economy in the 1960s to one driven by manufacturing and services sectors. Figures from the Central Bank show that GDP grew by 5.1% in 2024 (up from 3.6% in 2023), driven by strong domestic demand and a rebound in exports. Domestic growth was supported by higher household spending, backed by favourable labour market conditions, supportive policy measures, and healthy household balance sheets. Investment growth was bolstered by strong investment approvals and progress in multi-year projects by both the private and public sectors. Externally, exports recovered thanks to steady global growth, a continued tech upcycle, and higher tourist arrivals and spending. This supported the current account, leading to a surplus of 1.7% of GDP in 2024 (up from 1.5% in 2023). Growth is expected to slow to 4.7% in 2025, due to a moderation in investment growth, partly driven by increased global uncertainty.

Concerning public finances, the 2025 budget projects a reduction in the federal government deficit to 3.8% of GDP, down from an estimated 4.3% in 2024. Fitch Ratings expects federal government revenue/GDP to remain stable at 16.5% in 2025, with new measures like a tax on individual dividend income and an enhanced sales and service tax generating limited additional revenue. This will be partly offset by lower petroleum-related revenue, projected to account for 18% of total revenue in 2025. The debt-to-GDP ratio decreased to 68.4% in 2024 (from 69.8% one year earlier) amid nominal GDP growth and is expected to remain stable over the forecast horizon (IMF). Inflation has remained stable at around 2% (year-on-year) in 2024. With the expected implementation of RON95 gasoline subsidy reforms in mid-2025 and tighter labour market conditions, average headline inflation is projected to increase to 2.6% in 2025 (IMF's latest available data). Risks to this outlook are mainly to the upside, including potential global commodity price shocks and wage pressures from increases in the minimum wage and civil servants' pay.

Malaysia is on track to achieve high-income status by 2026. The country has one of the highest standards of living in Southeast Asia and a low unemployment rate estimated at 3.5% in 2024 (IMF), but the youth unemployment rate is more than triple (10.4%, Statistics Malaysia) and rural youth is not counted statistically. Despite substantial reductions in poverty and a narrowing of income gaps among ethnic groups over the past five decades, notable regional disparities persist in both income and human capital outcomes in Malaysia. Overall, the IMF estimated the country’s GDP per capita (PPP) at USD 41,021 in 2024.

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