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Malaysia is among the top 20 fastest-growing economies in Asia. It is a newly industrialised market economy that has been steadily growing over the past years; only the COVID-19 pandemic dented the growth curve.
The country’s gross domestic product (GDP) growth rose by 4.3% in 2019 after growing 4.8% in 2018. This was backed by several factors, including improvement in its labour market, sufficient spending on infrastructure, a pro-cyclical budget, and growing global demand for oil, gas, and electronics.
The Covid-19 pandemic, coupled with declining government expenditure and lower public and private investments, halted Malaysia’s growth trend and caused the economy to contract. The impact of the pandemic pushed the economy into negative territory, recording a 5.6% contraction in 2020.
In 2021, GDP growth rebounded to 3.1% and a year later GDP rose to a 22-year record high of 8.7%.
However, in 2023, the country’s economic growth rate fell to 3.7%, influenced by a mix of domestic economic difficulties and global uncertainties. Looking ahead to 2024 and 2025, the International Monetary Fund (IMF) anticipates the country’s GDP to expand by 4.4%.
Malaysia GDP Annual Growth Rate (in %)
Malaysia’s population of over 33 million is significantly lower than its neighbouring ASEAN countries such as Indonesia, the Philippines, Vietnam, and Thailand. However, the country’s labour productivity is higher than these nations due 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. The government is aiming to raise income per capita to achieve a high–income country status.
In 2021, the unemployment rate rose marginally to 4.6% from 4.5% in 2020, led by the reopening of the nation’s economy. In 2022, it averaged lower at 3.8% and last year fall to 3.6%. Looking ahead, the unemployment rate is expected to decline further to 3.5% in 2024 and 2025.
Malaysia Unemployment Rate (in %)
Currency and Central Bank
Malaysia’s official currency is the Malaysian ringgit or RM, which is divided into 100 sen. Prior to August 1975, it was called the Malaysian dollar and cents in English, until the official names were adopted.
The Central Bank of Malaysia or Bank Negara Malaysia (BNM) in Malay serves as the country’s central bank. It was founded on January 26, 1959, as Central Bank of Malaya or Bank Negara Tanah Melayu.
The central bank is tasked with issuing currency, formulating monetary policy, regulating Malaysia’s financial institutions and credit system.
In 2020, the nation experienced a negative inflation rate of 1.1%, followed by an increase to 2.5% in 2021 and a further rise to 3.4% in 2022. However, it declined to 2.5% in 2023. For this year, inflation is projected to be around 2.8%.
Malaysia Inflation (in %)
Industry and Trade
Malaysia’s economy has long transitioned from an agricultural-centric phase in the 1960s into an industrial and services-driven one.
Healthcare services, transport, distributive trade, and tourism are the main drivers of its service sector. As per latest figures, it accounts for about 50% of the country’s GDP and employs 62% of its labour force.
Meanwhile, Malaysia’s industrial sector makes up over 39% of the GDP and provides about 28% of the workforce. The country is considered one of the largest global exporters of semiconductor devices, electrical goods, and appliances.
Agriculture employs 9.65% of Malaysia’s labour force. The country is one of the top producers of palm oil, tropical wood, and rubber. However, its agricultural sector only contributes roughly 9% of the GDP (as of 2022).
Malaysia’s top 5 trading partners are Singapore, China, the US, Hong Kong and Japan. Among the biggest exports are electronic integrated circuits, refined petroleum oils, petroleum gases, palm oil, semiconductors, phone devices including smartphones, and crude oil.
The country imports, amongst others, electronic integrated circuits and microassemblies, refined petroleum oils, crude oil, coal and solid fuels made from coal, phone devices including smartphones.
Malaysia Economy: Balance of Trade
Stock Exchanges and Capital Markets
Previously known as the Kuala Lumpur Stock Exchange, Bursa Malaysia is the sole stock exchange of Malaysia. It offers a wide range of products, including equities, derivatives, and exchange-traded funds (ETFs).
In 2006, Bursa Malaysia partnered with FTSE Group to improve its previous Kuala Lumpur Composite Index (KLCI) and develop its current major index, the FTSE Bursa Malaysia KLCI, which is made up of the 30 largest listed companies based on market capitalisation.
Bond Market
Malaysia has a highly developed bond market and is the third-largest bond market in Asia, behind Japan and South Korea, in terms of bonds outstanding.
As of December 2023, the Malaysian bond market’s outstanding amount was RM2.01 tn ($432.54 bn). Over 57.67 of the bonds outstanding comprise sovereign bonds, while the remaining percentage is made up of corporate and quasi-government bonds.
The government securities issued in the country are Malaysian Government Securities (MGS), Malaysian Government Investment Issues (MGII), Malaysian Treasury Bills (MTB), and Malaysian Islamic Treasury Bills (MITB).
Local companies are also able to secure financing through the bond market 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% from 2024 to 2029.
Previously, the Covid-19 pandemic had dampened demand, further pressing on house prices. While between 2010 to 2019 an annual price growth of 7.5% was registered, house prices fell to 1.3% Y-o-Y in Q1 2021. During 2022, the average house price in Malaysia rose to around RM 449,600 ($96,750.64), a 2.83% increase from the preceding year.
2023 saw an improvement in market activity within the country’s residential property sector. Teh Young Khean, Executive Director of Office Strategy and Solutions at Knight Frank Malaysia, mentioned that new government initiatives along with the increasing presence of major multinational corporations in the country’s Klang Valley, are expected to stimulate additional interest and activity in the office market.
Malaysia Housing Index (in %)
Source of charts: tradingeconomics.com
