Malaysia’s economy slowed in 2018 as robust household consumption was met with tepid investment spending and slowing export growth. The recently elected Mahathir Mohamad government reinstated fuel subsidies and scrapped goods and service tax, which helped boost household consumption. But the political uncertainty in the lead up to the election and the cancellation of large infrastructure projects weighed on investment. Externally, the ongoing trade fracas between the US and China has taken the steam out of global trade, which has stymied Malaysia’s export volumes.
Growth in 2019 is forecast to remain slightly higher as private consumption is forecast to remain robust. But trends in the investment and export sectors will mirror that of 2018.
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.