Malaysia Economy

While rising domestic demand in Malaysia helped reassure investors after last summer’s regional downturn, concerns remain that the country is displaying an over-reliance on high domestic consumption levels to prop up growth.

Preparations in Malaysia are well under way for the rolling out of a new goods and services tax (GST) in April 2015, but opinions differ on how effective the levy will be in boosting revenue and critics have voiced concern that the tax could feed inflation.

With the end of an agreement granting Malaysia preferential access to the EU market looming, all eyes are on ongoing negotiations between Kuala Lumpur and Brussels aimed at securing a replacement free trade pact.

Despite a low inflation rate and relatively stable sovereign and corporate balance sheets, Malaysia is set to miss the targets set out in its Vision 2020.

The central bank in Malaysia is keeping an eye on macroeconomic stability at a time when a cooling external environment is putting pressure on growth. While international factors are starting to affect overall economic performance, domestic demand remains relatively robust, supported by consumer spending and public investments.

While a fiercely fought general election could send ripples through Malaysia’s economy in the next few months, the country otherwise looks set for another year of solid growth on the back of strong domestic demand and higher private investment driven by a number of public sector initiatives.