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Malaysia remains one of the top 20 fastest-growing economies in Asia, classified as a newly industrialized market economy. Over the years, the country has demonstrated steady economic growth, with the exception of a significant slowdown during the Covid-19 pandemic, which temporarily disrupted its upward trajectory.
This growth was underpinned by a resilient labor market, substantial investments in infrastructure, a supportive fiscal policy, and robust global demand for key exports such as oil, gas, and electronics.
The onset of the Covid-19 pandemic severely impacted the economy, causing a 5.6% contraction in 2020, driven by reduced government spending, declining public and private investments, and disruptions in global supply chains. However, the country staged a recovery in subsequent years. In 2021, GDP growth rebounded to 3.1%, and in 2022, it surged to 8.7%, marking the highest growth rate in 22 years, supported by a rebound in domestic consumption and a recovery in exports.
In 2023, economic growth moderated to 3.7%, as the country grappled with domestic economic challenges and external uncertainties, including a slowdown in global trade and tighter financial conditions.
Despite these headwinds, the International Monetary Fund (IMF), in its October 2024 World Economic Outlook, forecasts a GDP growth rate of 4.4% for 2025, reflecting Malaysia’s resilience and its continued focus on economic diversification and recovery.
Malaysia GDP Annual Growth Rate (in %)
Malaysia’s population of over 33 million is significantly smaller than its neighbouring ASEAN countries such as Indonesia, the Philippines, Vietnam, and Thailand. However, Malaysia consistently outperforms these nations in labour productivity, thanks to knowledge-based industries, its digital economy and the use of cutting-edge technology for manufacturing.
Malaysian people enjoy an affluent lifestyle only rivalled by Singapore and Brunei in the region. The government remains committed to elevating income per capita to achieve its long-term goal of becoming a high-income nation, as outlined in its various development plans.
The unemployment rate, which rose slightly to 4.6% in 2021 as the economy reopened post-pandemic, saw a steady decline in subsequent years. In 2022, it averaged 3.8%, and in 2023, it improved further to 3.6%. According to the IMF, unemployment is projected to decline to 3.5% in both 2024 and 2025, signaling continued recovery and stability in the labor market.
Malaysia Unemployment Rate (in %)
Currency and Central Bank
Malaysia’s official currency is the Malaysian ringgit (RM), divided into 100 sen. Before August 1975, it was referred to as the Malaysian dollar and cents in English, until the current official names were adopted.
The Central Bank of Malaysia, known as Bank Negara Malaysia (BNM), serves as the nation’s central bank. Established on January 26, 1959, initially as the Central Bank of Malaya or Bank Negara Tanah Melayu, it plays a crucial role in Malaysia’s financial stability. BNM is responsible for issuing currency, formulating and implementing monetary policy, and regulating the country’s financial institutions and credit systems.
In terms of inflation, Malaysia recorded a deflation of 1.1% in 2020 during the height of the pandemic. Inflation rose to 2.5% in 2021 and peaked at 3.4% in 2022, before easing to 2.5% in 2023. For 2024 and 2025, inflation is forecasted to remain moderate at approximately 2.8% and 2.5%, respectively.
Malaysia Inflation (in %)
Industry and Trade
Malaysia’s economy has evolved significantly from its agricultural roots in the 1960s to a diversified industrial and services-driven model.
The service sector is the largest contributor to Malaysia’s GDP. According to the Department of Statistics Malaysia (DOSM), the service sector accounted for approximately 52% of GDP in 2023 and employed around 63% of the labor force. Key drivers of the sector include healthcare services, transport, distributive trade, and tourism. Tourism has been recovering steadily post-pandemic, bolstered by an increase in international arrivals and domestic travel.
Malaysia’s industrial sector contributes approximately 37% of GDP and employs about 27% of the workforce, based on 2023 figures. The country is one of the world’s leading exporters of semiconductor devices, electrical goods, and appliances. Its manufacturing sector remains robust, particularly in electronics and electrical (E&E) products, which accounted for 36.5% of total exports in 2023 (DOSM).
Agriculture contributes around 7.5% of GDP and employs 10% of the labor force as of 2023. Malaysia remains a major global producer of palm oil, tropical wood, and rubber. While the sector’s contribution to GDP has diminished over the years, it plays a vital role in the country’s exports and rural development.
Malaysia’s top five trading partners in 2023 were China, Singapore, the United States, Hong Kong, and Japan. Its major exports include electronic integrated circuits, refined petroleum oils, palm oil, semiconductors, phone devices (including smartphones), crude oil. Imports primarily consist of electronic integrated circuits and microassemblies, refined petroleum oils, crude oil, coal and solid fuels, and phone devices (including smartphones).
Malaysia Economy: Balance of Trade
Stock Exchanges and Capital Markets
Bursa Malaysia, formerly known as the Kuala Lumpur Stock Exchange, is Malaysia’s sole stock exchange, offering a diverse range of products, including equities, derivatives, and exchange-traded funds (ETFs). The exchange operates the FTSE Bursa Malaysia KLCI, comprising the 30 largest listed companies by market capitalization.
As of May 2024, Bursa Malaysia reported an average daily trading value (ADTV) of RM3 bn, a 43% increase compared to 2023’s ADTV of RM2.1 bn. The average market capitalization grew by 2.9% month-over-month to RM2,022 bn at the end of May 2024.
Bond Market
Malaysia’s bond market is among the most developed in Asia. As of June 2023, the outstanding amount of Malaysian Government Investment Issues (MGII) was RM508 bn, accounting for 40% of Malaysia’s sukuk market. This contributes significantly to Malaysia’s position as the largest sukuk market globally, holding 43.3% of the global sukuk market share as of the end of 2022.
In 2023, the secondary bond market turnover was RM2.14 tn, with Malaysian Government Securities (MGS) comprising 49.9% and MGII/SPK making up 27.7% of the traded volume.
The government issues various securities, including Malaysian Government Securities (MGS), Malaysian Government Investment Issues (MGII), Malaysian Treasury Bills (MTB), and Malaysian Islamic Treasury Bills (MITB). Local companies also utilize the bond market for financing by issuing bonds, medium-term notes, and commercial papers.
Real Estate Market
According to Mordor Intelligence, Malaysia’s real estate market is valued at $36.76 bn in 2024 and is expected to register a CAGR of 6.64% to reach to reach $50.69 bn by 2029.
Between 2010 and 2019, Malaysia experienced an annual house price growth of approximately 7.5%. However, in Q1 2021, house prices saw a modest increase of 1.3% year-over-year (YoY), reflecting the dampening effects of the Covid-19 pandemic on demand. In 2022, the average house price in Malaysia rose to around RM 449,600 (approximately $96,750), marking a 2.83% increase from the previous year.
In 2023, the residential property sector showed signs of improvement. Knight Frank Malaysia reported increased market activity, particularly in the Klang Valley region. The presence of major multinational corporations and supportive government initiatives have been instrumental in stimulating interest and activity in the office market.
The Malaysian government has been proactive in implementing measures to support the real estate sector. Initiatives aimed at providing affordable housing and stimulating economic growth have played a significant role in the market’s recovery and are expected to continue influencing the sector positively in the coming years.
Malaysia Housing Index (in %)
Editorial Note:
This article was written with the assistance of AI. A human editor reviewed and refined the text for accuracy and quality before publication.
Source of charts: tradingeconomics.com
