Malaysia GDP to grow 5.1% in 2013, 2014: World Bank

PETALING JAYA (June 25, 2013): Malaysia's gross domestic product (GDP) is expected to grow by 5.1% for both 2013 and 2014, driven by higher consumer and business spending, said a new World Bank report.

Resilient domestic demand will allow the Malaysian economy to recover from a slow first quarter in 2013 of 4.1%, it added.

"As the global recovery gathers speed in 2014, Malaysia's external sector will increase its contribution to growth, offsetting the impact of tighter fiscal policies on the domestic economy," said the World Bank in a report entitled "Malaysia Economic Monitor: Harnessing Natural Resources" released yesterday.

Still, Malaysia needs to accelerate structural reforms to ensure that its economy remains diversified and dynamic as its trade has become more dominated by commodities such as crude oil, natural gas, rubber and palm oil.

The report suggested that policy makers in Malaysia consider measures to enhance structural reform and management of natural resource revenues going forward, including improving sustainable consumption of natural resources by increasing the role of Malaysia's formal oil wealth fund, reforming its fuel subsidies and reviewing its gas pricing.

"The coming onstream of new sources of global energy is likely to put downward pressure on several commodity prices. This will no doubt put restraints on growth on a commodity-exporting country like Malaysia," said World Bank chief economist Kaushik Basu.

"I hope Malaysia will show the nimbleness it has shown in the past."

In recent years, the Malaysian economy has become less diversified, with high-tech manufacturing declining and commodities increasing as a share of exports. Reversing this trend, as well as saving a higher share of revenues from oil and gas, will enhance the resilience of Malaysia's economy, said the World Bank.

The World Bank report identified Malaysia as one of a few developing countries that has successfully converted an abundance of natural resources into long-term sustainable growth.

"Sound policy choices ensured revenues from resource extraction were reinvested in the economy in the form of machines, buildings and education.

"This supported high rates of growth that was shared among the population, raising the average incomes of the bottom 40% of rural households by 7.1% a year over three decades, while poverty rates plummeted," said the World Bank.

World Bank senior economist for Malaysia Frederico Gil Sander, meanwhile, said for Malaysia to reach its goal of becoming a high-income nation, it will need to continue managing natural resources sustainably.

"Some adjustments are needed to spend less of the resource revenues on consumption and more on building skills and institutions that will support further diversification."