Malaysia is one of the largest and fastest growing economies in Southeast Asia. The average annual growth rate of real GDP until 2020 exceeded 5% due to the high demand for Malaysian goods in foreign markets, the trade of which accounts for most of the country's GDP. Despite the recession caused by the COVID-19 pandemic, the country managed to resume growth by 2021 at the level of 3.1%. According to the forecasts of the World Bank, the country may move into the group of high-income countries within a few years.
In 2022, Malaysia continued to grow, which began in 2021 after the end of the acute phase of the COVID-19 pandemic. In 2022, the GDP growth rate reached 8.7%, which was a record value since 2000. Such rapid economic growth is due to the effect of delayed domestic demand against the background of a gradual economic recovery, as well as high export indicators: due to rising world prices for raw materials, higher average prices for palm oil due to supply disruptions in the world market of edible oils, dynamic growth of exports of manufacturing products. In addition, the competent fiscal and monetary policy of the government was a significant incentive for the resumption of economic growth of the country.
According to the IMF forecasts, in 2023, Malaysia's economic growth will slow down to 4.5% due to a number of constraining factors, including the exhaustion of the low base effect, as well as the projected slowdown in economic growth in the countries that are Malaysia's main trading partners (USA and EU countries), which account for almost 20% of total exports countries in value terms. On the other hand, the economy is expected to be supported by the recovery of the Chinese economy in 2023, which accounts for 13.6% of Malaysia's exports (according to mirror data — over 24%).
In addition, the gradual recovery of Malaysia's tourism industry can mitigate the negative consequences of the expected decline in economic revenues from exports of goods: it is planned to lift restrictions and open borders for tourists from the Asia-Pacific region (primarily China), the Middle East and Europe.
GDP by PPP per capita of Malaysia in 2022 amounted to 34.4 thousand US dollars and by 2028, according to IMF forecasts, will reach 47.2 thousand US dollars, demonstrating an average annual growth rate of 5.1% for 2023-2028.
In 2022, inflation in Malaysia rose to 3.4% mainly due to floods and landslides, which caused interruptions in the supply of agricultural products, food shortages and a natural increase in prices. Additional factors contributing to the increase in inflation were the slowdown in global economic growth and the depreciation of the national currency against the US dollar.
Nevertheless, the inflation rate in Malaysia remained well below the global average. The low inflationary pressure is partly due to the Government's successful measures to control inflation through subsidies and the price ceiling. In 2022, the Government of the country allocated 31.0 billion Malaysian ringgit (about 7.0 billion US dollars at the exchange rate of 2022) for subsidies and other measures to support the population aimed at limiting the growth of the cost of living, especially for low-income households. The Malaysian government has also introduced subsidies for vegetable oil, flour, poultry, gasoline and electricity, which has helped stabilize the rise in prices for basic necessities.
