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Malaysia: Momentum Builds up for Higher Growth

Highlights
CapitalKuala Lumpur
Population31.4 million
CurrencyMalaysian Ringgit (1 MYR = 0.2331 USD as of 27 June 2017)
Official languageBahasa Malaysia
Form of governmentConstitutional Monarchy

 

Major Merchandise Exports (% of total, 2016) Major Merchandise Imports (% of total, 2016)
Machinery & transport equipment (43.1%)Machinery & transport equipment (45.3%)
Mineral fuels (14.0%)Manufactured goods (12.6%)
Manufactured goods (8.9%)Chemicals (10.5%)
Top Three Export Countries (% of total, 2016)Top Three Import Countries (% of total, 2016)
Singapore (14.5%)China (20.4%)
China (12.5%)Singapore (10.4%)
USA (10.2%)Japan (8.2%)

Source: Economist Intelligence Unit

Political Highlights

The Constitution of Malaysia requires that a general election must be held at least once every five years. The ruling Barisan Nasional (BN), which is a multi-ethnic coalition of parties headed by the United Malays National Organization (UMNO), has been in power since the country’s independence in 1957.

The government’s policy agenda will centre on the Government Transformation Programme started in 2010, which outlines seven initiatives, including moves to improve education, upgrade rural infrastructure and tackle corruption, aiming at transforming Malaysia from a upper middle-income into a high-income country by 2020. The 11th Malaysia Plan (11MP), a public-spending agenda for 2016-20, will support the implementation of these initiatives. The latest strategy focuses on poverty alleviation, income inequality, green growth and infrastructure development.

Malaysia is a multi-ethnic and multi-religious country. Malays form about half of the population, followed by Chinese (23%), indigenous people (12%) and Indian (7%). The majority Muslim ethnic Malay is dominant politically and pro-Malay policies have been in place since 1970s.

Economic Trend

Economic Indicators2015
2016
2017
2018^
2019^
Nominal GDP (USD bn)296.4296.5305.5*331.9349.9
Real GDP growth (%)5.04.26.0*5.55.4
GDP per capita (USD)9,6509,5109,660*10,36010,780
Inflation (%)2.12.13.83.12.8
Budget balance (% of GDP)-3.2-3.1-2.9*-2.8-2.8
Current account balance (% of GDP)3.12.32.6*2.82.1
Government debt (% of GDP)54.552.752.5*52.152.3
External debt (% of GDP)64.467.673.9*72.872.6

* Estimates ^ Forecast
Source: Economist Intelligence Unit

Malaysia’s economy is highly open to international trade. Major exports include electrical appliances, electronic parts and components, oil and gas, palm oil and rubber, accounting for roughly 70% of GDP. An anticipated pick-up in world trade growth motivated the increase of export-oriented and construction sectors, and helped to underpin overall investment spending. Prospects for growth look broadly favourable for 2017.

Malaysian government has taken steps to shield the fiscal position from the effects of lower oil-related revenues, and to diversify the country’s revenue base away from reliance on oil and gas sector. Some macro-prudential policies to slow credit growth and curb household borrowing were also carried out, and as a result, the household debt to GDP ratio contracted to 88.4% at the end of 2016. 

As a leading force in regional integration and the promotion of the ASEAN trading block, Malaysia has managed to consolidate its position as the principle gateway to South-east Asia. Malaysia also focuses more on higher value-added activities in both industry and services. Accelerated implementation of productivity-enhancing reforms to increase the quality of human capital will be important to Malaysia’s long-term success.

Chart: Hong Kong total exports to Malaysia
Chart: Hong Kong total exports to Malaysia

Hong Kong-Malaysia Trade

Total exports from Hong Kong to Malaysia increased by 5.1% from HK$27,273 million in 2016 to HK$28,663 million in 2017. The top three export categories to Malaysia were: (1) electrical machinery, apparatus & appliances, & parts (+5.1%), (2) telecommunications, audio & video equipment (+1.3%), and (3) office machines & computers (-5.2%), which represented 68.2% of total exports to Malaysia.

HKECIC Underwriting Experience

HKECIC imposes no restrictions on covering Malaysian buyers. Currently, the insured buyers in Malaysia range from small and medium sized companies to subsidiaries of foreign listed companies. The Corporation’s underwriting experience on Malaysia has been satisfactory, with no claim payment or payment difficulty case reported in the past 12 months (from March 2017 to February 2018).

Content provided by Picture: Hong Kong Export Credit Insurance Corporation
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