Malaysia: Macroeconomic Country Outlook
- GlobalData forecasts the real GDP to grow by 6.5% and consumption by 6.8% in 2022.
- Malaysia ranked 12th out of 190 countries in the World Bank’s doing business ranking in 2020.
- According to GlobalData, the manufacturing sector is expected to witness a 5.2% growth in 2022.
PESTLE Summary
- Political: Prime Minister of Malaysian signs a pact with opposition leaders. In March 2021, the Prime Minister Yaakob signed an unprecedented cooperation pact in the parliament with the main opposition bloc led by Anwar Ibrahim, in a move to prevent any bid to undermine his rule ahead of general elections. This pact will help cast aside all political differences and ensure the country’s recovery is holistic and inclusive. The government pledged to immediately lower the minimum voting age from 21 to 18, ensure bipartisan agreement on any new bill and get opposition input on the country’s economic recovery.
- Economic: Russia-Ukraine crisis to have a minimal direct impact on Malaysian economy. The ongoing conflict between Russia and Ukraine might have a minimal direct impact on Malaysian economy. However, supply chain disruptions could pose problems, thereby causing prices of commodities to rise in the coming months. However, on economic and political front, despite recent invasion of Ukraine, Malaysia will not impose any kind of sanctions on Russian economy. According to MIDF (Malaysian Industrial Development Finance Berhad), crisis in Ukraine would have minimal direct impact on the overall trade, as the combined size of trade with Ukraine and Russia covered only 0.5% of Malaysia’s total trade as of 2021. However, the Malaysian government agrees that this invasion is gross violation of international norms and a completely unacceptable precedent.
- Social: Working-age population. Malaysia has a working-age population structure, with 69.6% of the total population between 15 and 64 years of age in 2021. The median age of the population was 29.5 years in 2021, which indicates the country has a very young workforce. Owing to the country’s well-structured educational system, the workforce is highly educated as compared to other Latin American nations.
- Technology: 5G network plan. In March 2022, the Malaysian government will implement its plan to allow a single 5G wholesale network. However, to increase competition, the government outlined an intention to allocate up to 70% equity in state-owned operator Digital Nasional to telecom players and will retain the remaining 30% stake in Digital Nasional. The government also launched a special purpose vehicle to manage the single national 5G network. The objective of the Malaysian government is to achieve at least 80% 5G network coverage area of populated areas by 2024.
- Legal: Export duties imposed in March 2021 to protect domestic industry. In March 2021, the Malaysian government imposed a 15% duty on exports of ferrous scrap to protect the domestic steel market. The country is a ferrous scrap net importer. Only 30% of local requirements have been met since a large amount is exported. Hence, an export duty will help serve domestic production and consumption. Exports began to shoot up in 2016 after the country lifted an export tax of 10%. In January 2022, the Ministry of International Trade and Industry announced that its new scrap import policy became effective from January 10th with new requirements on importers.
- Environmental: Renewable energy and clean energy to be future of Malaysia. The Malaysian government has recognized solar energy as a key contributor to achieving its goal of 20% renewable energy by 2025. Malaysia’s Net Energy Metering scheme (NEM) has allowed excess solar photovoltaic-generated energy to be exported back to the grid on a one-on-one offset basis. The government has made solar energy affordable to people through the implementation of a Green Investment Tax Allowance (GITA) by the Malaysian Investment Development Authority (MIDA) and NEM 3.0 till 2023. The government has implemented policies to make Malaysia more energy efficient. The government needs to include industry players such as policymakers, financial institutions and investors to help build Malaysia’s renewable energy ecosystem.
Key fundamentals
Macroeconomic outlook
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The Malaysian government has announced that income tax relief on savings in private retirement schemes will be extended for four more years until 2025. To support investment growth, the government has announced many measures, including relaxation of taxes and the creation of a High Technology Fund to support high technology firms and investments.
- The number of unemployed in Malaysia declined to 680,400 persons, registering an unemployment rate of 4.2% in January 2022, according to DOSM. The labor force situation continued to improve due to a continuous rise in employment.
- The Malaysian government will leverage on escalating prices of crude palm oil to increase the country’s market share of palm oil in the global market. The Plantation Industries and Commodities Ministry of Malaysia will continue to guarantee the future of smallholders and Malaysian palm oil industry players.
- Malaysia’s King Al-Sultan Abdullah Ri'ayatuddin Al-Mustafa Billah called for an acceleration of the country’s economic recovery to ensure it does not fall behind. The government is targeting the creation of almost 600,000 job opportunities in 2022, which will help in reducing the unemployment rate and accelerating growth.
GlobalData Country Risk Index (GCRI) - Q4 2021
Malaysia ranked 12th out of 190 countries in the World Bank’s doing business ranking in 2020. In the World Bank’s Ease of Doing Business report for 2020, Malaysia’s score (81.5 out of 100) is ahead of China (77.9) and the regional average (88.3). It takes 8.5 procedures to start a business in Malaysia as compared to the East Asia and Pacific average of 6.5 procedures. The country ranked second in terms of dealing with construction permits and protecting minority investors, and fourth in terms of getting electricity (out of 190 countries).
GCRI Methodology
GlobalData’s unique Country Risk Model determines the existing and future level of country risk by assessing various qualitative and quantitative factors. The index is designed to help firms formulate their global business strategies based on historical developments in an economy.
The Country Risk Index incorporates the latest available macroeconomics, political, social, technological, environmental, and legal data from a range of recognized national and international statistical sources and incorporates proprietary data from GlobalData. Asia-Pacific nations in this publication include China, Malaysia, Thailand, Indonesia, Singapore, Australia, Vietnam, the Philippines, and New Zealand.
About the report
GlobalData Macroeconomic Outlook report is designed to provide detailed macro-economic analysis which will help clients in their business planning, investment and strategic decisions, and analysis. It also provides a quick view of the current situation and the risk score of the country in comparison to region and world based on the proprietary risk framework. The report also highlights key strengths, weaknesses, opportunities, and threats in each of the pillars of PESTLE, economic growth prospects, and key events which can impact the country’s future outlook.
More details: Malaysia PESTLE Insights – A Macroeconomic Outlook Report
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