Malaysia Country profile
Malaysia has an impressive economic development record. Since independence in 1957, it has successfully developed its manufacturing, services and tourism industries to complement the country’s competitive resource sector. It is a high middle-income, export-oriented economy, with per capita GDP of US$9545 in 2016. Malaysia compares favourably to its neighbours — with a solid investment grade credit rating and favourable business climate. Annual GDP growth has averaged 5% over the past 10 years.
Growth moderated to 4.3% in 2015, supported by strong investment, robust consumption and improved foreign demand. But low commodity prices and softer Chinese demand are weighing on exports. The recovery in commodity prices and tepid recovery in global growth should lift growth to 4½% or a little higher in 2017.
The highly educated work force and quality infrastructure will support the long term outlook. China’s increasing shift into higher value added production could support Malaysian firms involved in global supply chains. But the country will also need to identify its manufacturing niche to use its large stock of capital adequately.
Malaysia is classed an upper-middle income economy by the World Bank with GDP per capita of US$9545 in 2016. Per capita incomes are forecast to exceed US$15,000 by 2021— roughly equivalent to Slovakia and Uruguay today. Since Malaysia ranks only 65th in the world for per capita income, it has considerable scope to grow improve this ranking.
Malaysia enjoys a solid investment grade by credit rating agencies and has an OECD country credit grade of 2 (equivalent to the UAE, China and Lithuania). This suggests a low likelihood that it will be unable or unwilling to meet its external debt obligations in a systemic sense (though, needless to say, individual private and ‘sub-sovereign’ debtors can and do default).
The World Bank’s ease of doing business gauge — which measures regulation and red tape relevant to a domestic small to mid-sized firm — ranks the Malaysian business climate 23rd out of 190 economies. Malaysia significantly outperforms regional peers on all measures and ranks within the top 10 countries in the world for getting electricity and protecting investors.
The World Bank ranks Malaysia in the top quartile for the government effectiveness dimension of governance. It ranks in the second percentile for control of corruption, rule of law and regulatory quality. However, it doesn’t score as well on ‘political stability and absence of violence’ as well as ‘voice and accountability’ indicators.
In terms of two-way goods and services trade, Malaysia is Australia's 2nd largest trading partner in ASEAN and 11th largest partner overall. In 2015-2016, Australia's goods exports to Malaysia totalled $5.4b (2% of total goods exports). Major exports included copper ($607m), coal ($506m), crude petroleum ($281m) and wheat ($262m).
The Malaysia-Australia Free Trade Agreement (MAFTA) came into force on 1 January 2013.
Australia also exported $2.1b of services to Malaysia in 2015-2016 — of which $830m was education exports. Malaysia is Australia’s 5th largest source of international students — with over 24,000 enrolments in 2015 (3% of total).
Malaysia is also an important source of tourists, spending $1.1b in 2015. Over 327,000 visited in 2015, 5% of total, an 8% increase from 2014. Tourism Australia expects this market could grow to $2.5b by 2020.
In terms of foreign investment stocks, Malaysia is a small investor in Australia, owning a portfolio of $20.5b in 2015 (0.7% of the total foreign investment stock). Australia’s largest investors remain traditional markets — the US with $860b, and the UK with $563b.
Malaysia also constitutes a small share of Australia’s investment abroad (<1% of the total in 2015). Australia’s investment in Malaysia fell to $8.5b in 2015 down from $9.8b a year earlier.