Kuala Lumpur: Malaysia’s strong growth momentum is expected to continue in the near term, with the economy projected to expand by 4.7 per cent this year, the International Monetary Fund (IMF) said.
According to BERNAMA News Agency, the IMF stated that the favourable economic conditions present an opportunity to strengthen macroeconomic policy buffers and accelerate structural reforms. Malaysia’s external position in 2024 is preliminarily assessed to be stronger than the level implied by medium-term fundamentals and desirable policies. The IMF emphasized that fiscal consolidation should continue to rebuild buffers and meet the medium-term targets set under the Fiscal Responsibility Act (FRA).
The IMF has welcomed the historic enactment of the FRA and urged its swift and thorough implementation. It also recommended achieving a small structural primary balance by 2027. Building on successful subsidy reforms, including those for electricity and diesel, the IMF advised gradually phasing out the remaining fuel subsidies.
The IMF noted that inflation, which eased to 1.8 per cent in 2024, is projected to rise to 2.6 per cent this year due to the expected implementation of gasoline subsidy reforms, before moderating to 2.3 per cent in 2026. It highlighted that risks to growth, mostly external, are tilted to the downside, while inflation risks are tilted to the upside.
Downside external risks include deepening geoeconomic fragmentation, a slowdown in major trading partners, and escalating geopolitical conflicts. Upside growth risks include the faster implementation of investment projects. The IMF added that upside inflation risks stem from global commodity price shocks and potential wage pressures from increases in the minimum wage and civil servants’ pay.
Meanwhile, the IMF stated that the current neutral monetary policy stance is appropriate. It noted that systemic financial risks appear contained and that the financial sector remains sound. Banks’ capital and liquidity positions are robust, and credit growth, corporate and household balance sheets, and real estate markets do not pose systemic risks at this juncture.
The findings were based on the IMF Article IV consultation paper, which reports on discussions between the IMF and a member country.