IMF Staff Completes 2020 Article IV Consultation Visit to Malaysia
December 17, 2019
End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF’s Executive Board for discussion and decision.
- The Malaysian authorities are making progress on their reform agenda. Real GDP growth is projected at 4.5 percent for 2019, underpinned by domestic demand.
- The 2020 budget strikes a balance between fiscal consolidation and growth. The current monetary policy stance is appropriate.
- Accelerating the authorities’ structural reform agenda is important to boost productivity and help achieve high income status.
An International Monetary Fund (IMF) team, led by Nada Choueiri, visited
Kuala Lumpur and Putrajaya from December 5 to December 17, 2019, to conduct
discussions for the 2020 Article IV Consultation with Malaysia. At the
conclusion of the visit, Ms. Choueiri issued the following statement:
“The Malaysian authorities are making progress on their reform agenda. Real
GDP growth is holding up and is projected at 4.5 percent for 2019, driven
by domestic demand. Headline inflation is expected to remain subdued at
slightly under 1 percent this year. Credit growth has moderated recently,
and capital flows have been manageable. The current account surplus is
projected to increase to 3.5 percent of GDP in 2019.
“Looking ahead, real GDP growth is projected stable at 4.5 percent in 2020,
with domestic demand remaining the main driver of growth, while continued
trade tensions between the U.S. and China are expected to have an overall
adverse impact on Malaysia’s growth. Inflation should average 2.1 percent
as the effect of the GST removal vanishes.
“The risks to the growth outlook are, on balance, to the downside. On the
external side, Malaysia is vulnerable to escalating trade tensions, an
abrupt deterioration in market sentiment towards emerging markets, and
weaker-than-expected trading partners growth, but the finalization of a
sustainable phase-one deal between the US and China is an upside risk.
Domestically, a sharp drop in real estate prices or a deterioration in
household debt service ability are downside risks.
“The fiscal adjustment planned for 2019 is on track and the 2020 budget
strikes a balance between fiscal consolidation and growth. The authorities’
commitment to medium term fiscal consolidation is welcome and would create
space for increased social spending and help achieve inclusive growth. In
this context, identifying specific revenue and spending measures to support
medium term fiscal consolidation is a priority.
“Malaysia’s monetary policy framework has performed well, delivering price
stability and robust growth in recent years. The current monetary policy
stance is appropriate in the context of a closing output gap. In case of
adverse shocks, the policy response could be a combination of use of
available fiscal and monetary policy space and exchange rate flexibility.
“The financial sector is stable. Banks are well
capitalized, profitability has been maintained and asset quality is sound.
Household debt is high compared to peers and the real estate sector
represents a vulnerability. The authorities’ close monitoring of these
risks is welcome.
“The authorities have made progress in governance reforms, including by
launching the National Anti-Corruption Plan. It is important to sustain the
momentum and anchor reforms in appropriate legislation.
“Acceleration of the authorities’ structural reform agenda would boost
productivity and help achieve high income status. Priority measures in this
area include: (i) continue to promote trade openness; (ii) continue to
improve the business environment by facilitating SME access to credit;
(iii) enhance the quality of and access to education; (iv) encourage
innovation and technology adoption; and (v) boost female labor force
“The IMF team would like to thank the officials of the Government of
Malaysia and Bank Negara Malaysia, as well as representatives from think
tanks, NGOs, and the private sector for the helpful discussions. We would
also like to thank the authorities for their warm hospitality during our
stay. We look forward to maintaining a close and productive relationship
with Malaysia. The IMF team will prepare a staff report and present it to
the Executive Board of the IMF, currently expected in February 2020.”
IMF Communications Department
PRESS OFFICER: Keiko Utsunomiya
Phone: +1 202 623-7100Email: MEDIA@IMF.org