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MINISTRY OF FINANCE E C O N O M I C O U T L O O K | 2 0 2 4 V O L U M E 6 Economic Outlook 2024 T.PAGE n PREFACE 2024.indd 1 06/10/2023 6:51 PM Copyright Reserved All rights reserved.
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5, Persiaran Perdana, Precint 2, Federal Government Administrative Centre, 62592 Putrajaya.
Fax : 03-88823881 E-mail : fed@treasury.gov.my The Economic Outlook is an annual publication released on the same day as the Annual Budget.

The 2024 edition is released on 13 October 2023.

Sale copies are obtainable from: www.pnmb2u.com This publication is also available for download at: www.mof.gov.my PRINTED BY PERCETAKAN NASIONAL MALAYSIA BERHAD KUALA LUMPUR, 2023 www.printnasional.com.my email: cservice@printnasional.com.my Tel.
: 03-92366895 Fax: 03-92224773 T.PAGE n PREFACE 2024.indd 2 06/10/2023 6:51 PM PREFACE MINISTER OF FINANCE MALAYSIA The global economy continues to traverse through an environment filled with challenges since the COVID-19 pandemic.

Deepened geopolitical tensions and persistent tightening of monetary policies to address inflation, have increased the risk of a worldwide slowdown.
The circumstances are aggravated by uncertainties in major economies, mainly impacting developing nations as well as weakening trade dynamism against a backdrop of supply chain disruptions and ongoing trade tensions.

Malaysia is not immune from these global developments, given the degree of openness in our economy and financial system.
The diversified structure of the Malaysian economy and our solid fundamentals built on the blood, sweat and tears of the rakyat over the years have bolstered the economy’s resilience and positioned us on a steady growth path.

These positive factors, supported by firm policies and action plans anchored on the framework of Ekonomi MADANI, as well as the continuous implementation of pragmatic measures and initiatives laid by the Government, will keep our economy strong and resilient.
While the external sector remains important, growth is increasingly driven by domestic demand.

The nation’s manageable inflation, favourable labour market conditions, healthy foreign reserves, current account surplus and high national savings, robust financial sector and well-developed capital market, continue to sustain the economic momentum.

Amid the global economic slowdown, the Malaysian economy recorded a growth of 4.2% in the first half of 2023 and is expected to expand at approximately 4% in 2023.
The success in charting our economic growth and overcoming crises would not be possible without the sacrifice and dedication of the rakyat.

The Government remains resolute to ensure all Malaysians are able to enjoy the fruits of the nation’s wealth and prosperity through sustainable and inclusive growth.
Recognising this, the framework of ECONOMIC OUTLOOK 2024 iii T.PAGE n PREFACE 2024.indd 3 06/10/2023 6:52 PM “Ekonomi MADANI: Memperkasa Rakyat” was formulated with the utmost priority to serve the rakyat.

The framework will serve as a foundation to the recently announced policies, including the National Energy Transition Roadmap, the New Industrial Master Plan 2030 and the Mid-Term Review of the Twelfth Malaysia Plan.
In this regard, the Government has envisaged seven targets to be achieved by the country within the next ten years.

These initiatives are anticipated to drive the nation’s economy, with a projected growth rate of 4% to 5% in 2024.

The wellbeing of the rakyat remains this Government’s utmost concern and priority.

The prosperity of the nation must benefit all segments of society.
Thus, it is vital to ensure that the economic pie distribution is fair and equitable, prioritising excellent healthcare services and quality education for all Malaysians.

In the context of employment and wages, salaries must commensurate with workers’ productivity.

In addition, providing better social protection and public amenities, including transport, water and electricity supply, as well as broadband services, will create more equitable opportunities to improve the rakyat’s quality of life.
An agile public service delivery supported by the digitalisation agenda is imperative to drive economic transformation.

The Government will also focus on progressively enhancing Malaysia’s fiscal sustainability by mobilising revenue as well as optimising expenditure to address leakages and wastages.

The year 2024 is envisaged to be a promising year for Malaysia.
The execution of several policies announced recently, including the implementation of projects under the Mid- Term Review of the Twelfth Malaysia Plan, will solidify Malaysia’s efforts in becoming Asia’s most dynamic economy in the near future.

While we may encounter challenges and structural changes, our resilience and capacity to innovate are formidable.

It is a collective mission for all Malaysians to unite in harmony, embrace changes and prioritise sustainable growth strategies.
Together, we shall chart a successful course ahead, that reaps equitable benefits for all and secures a brighter future for our beloved nation.
ANWAR IBRAHIM ANWAR IBRAHIM 13 October 2023 13 October 2023 iv ECONOMIC OUTLOOK 2024 T.PAGE n PREFACE 2024.indd 4 06/10/2023 6:52 PM THE ECONOMY 2024 in constant 2015 prices (share to total in %) Public Investment1 2.9% Exports of Services 6.5% Private Consumption 38.2% DEMAND RM2,656,097 MILLION Public Consumption 7.8% Private Investment1 9.7% Exports of Goods 34.9% Mining 3.7% Construction 2.3% Agriculture 3.8% Imports of Services 7.8% Services 37.4% Manufacturing 14.7% SUPPLY RM2,656,097 MILLION 1Includes change in stocks Source: Ministry of Finance, Malaysia Imports of Goods 30.3% ECONOMIC OUTLOOK 2024 v T.PAGE n PREFACE 2024.indd 5 06/10/2023 6:52 PM T.PAGE n PREFACE 2024.indd 6 06/10/2023 6:52 PM MALAYSIA: KEY DATA AND FORECAST AREA 2020 (square kilometres) Malaysia Peninsular Malaysia 330,241 131,786 Sarawak 124,450 Sabah 73,621 Federal Territory1 384 POPULATION2 (million) DOMESTIC PRODUCTION Gross Domestic Product (constant 2015 prices) Agriculture Mining and quarrying Manufacturing Construction Services Import duties 202210 32.7 202311 33.4 202412 33.7 RM million change (%) RM million change (%) RM million change (%) 1,510,939 8.7 1,569,247 ~ 4.017 1,645,078 4.0 – 5.0 99,073 96,199 364,131 53,441 0.1 2.6 8.1 5.0 99,620 95,448 369,359 56,824 881,310 10.9 930,125 16,785 7.3 17,868 0.6 100,770 -0.8 98,030 1.4 6.3 5.5 6.5 384,727 60,688 981,990 18,873 1.2 2.7 4.2 6.8 5.6 5.6 Gross Domestic Product (current prices) 1,791,358 15.7 1,850,102 ~ 3.517 1,974,027 6.0 – 7.0 Final consumption expenditure: Public 208,887 6.1 213,063 2.0 221,165 Private 1,031,759 14.9 1,111,748 7.8 1,204,270 Gross fixed capital formation: Public3 Private Changes in inventories and valuables 72,330 253,939 94,811 7.7 9.8 – 79,856 269,856 46,912 10.4 88,271 6.3 290,016 – 31,317 Exports of goods and services 1,378,452 26.0 1,272,424 -7.7 1,345,773 Imports of goods and services 1,248,820 27.2 1,143,757 -8.4 1,206,785 NATIONAL INCOME AND EXPENDITURE Gross National Income (constant 2015 prices) 1,479,619 7.9 1,544,269 4.4 1,614,614 Gross
 National Income (current prices) 1,731,944 14.9 1,802,983 4.1 1,915,537 Gross National Savings (current prices) Per Capita Income (current prices, RM) 476,178 52,968 18.3 14.5 458,596 54,015 -3.7 471,844 2.0 56,920 FEDERAL GOVERNMENT FINANCE 2022 202313 202414 Revenue 294,357 25.9 303,200 Operating expenditure 292,693 26.4 300,140 3.0 2.5 307,600 303,800 Current balance 1,664 3,060 3,800 3.8 8.3 10.5 7.5 – 5.8 5.5 4.6 6.2 2.9 5.4 1.5 1.2 Development expenditure (net) 70,167 10.9 96,300 37.2 89,200 -7.4 COVID-19 Fund4 Overall balance % of GDP Domestic borrowings (net) Offshore borrowings (net) Change in assets5 30,979 -17.9 – -99,482 -5.6 99,687 -266 61 -93,240 -5.0 93,580 -300 -40 – -85,400 -4.3 – – – vii 2.
Key Data BI 2024.indd 7 05/10/2023 8:32 PM economic outlook 2024 MALAYSIA: KEY DATA AND FORECAST (cont’d) 2022 2023 2024 RM million % GDP RM million % GDP RM million % GDP Federal Government Debt6 Domestic debt Treasury bills Malaysian Government Investment Issues Malaysian Government Securities Government Housing Sukuk Offshore borrowings Market loans Project loans – – – – – – – – – – – – – – – – – – 202210 202311 202412 BALANCE OF PAYMENTS (NET) RM million RM million RM million Balance on current account Goods Services Primary income Secondary income Balance on capital and financial accounts Net errors and omissions Overall balance EXTERNAL TRADE Gross exports of which: Manufactured Agriculture Mining Gross imports of which: Intermediate goods Capital goods Consumption goods Total trade Trade balance PRICES 55,098 186,029 -56,397 -59,414 -15,120 11,902 -13,641 53,359 61,972 170,171 -41,504 -47,119 -19,575 – – – 62,240 174,876 -35,888 -58,490 -18,258 – – – RM million change (%) RM million change (%) RM million change (%) 1,550,009 24.9 1,429,547 -7.8 1,501,859 1,304,668 22.1 1,235,167 -5.3 1,303,202 120,903 117,346 23.3 68.2 90,876 95,609 -24.8 -18.5 92,405 98,343 1,293,811 31.0 1,205,339 -6.8 1,264,533 706,551 120,231 104,017 29.5 15.8 24.0 636,558 113,335 96,462 -9.9 -5.7 -7.3 669,696 119,079 100,388 2,843,821 27.6 2,634,886 -7.3 2,766,393 256,198 1.0 224,208 -12.5 237,326 5.1 5.5 1.7 2.9 4.9 5.2 5.1 4.1 5.0 5.9 Index change (%) Index change (%) 2.5 - 3.0 (2.5) – (0.5)15 – – Index change (%) – – 2.1 – 3.6 0.1 – 2.1 Consumer Price Index (2010 = 100) Producer Price Index: Local Production 127.2 120.8 3.3 7.8 (2010 = 100) LABOUR Labour force Unemployment7 viii Thousands change Thousands (%) change (%) Thousands change 16,022.1 1.4 16,358.6 2.1 16,669.4 630.4 (3.9) 574.4 (3.5) 569.5 (%) 1.9 (3.4) 2.
Key Data BI 2024.indd 8 05/10/2023 8:32 PM economic outlook 2024 MALAYSIA: KEY DATA AND FORECAST (cont’d) FINANCIAL AND CAPITAL MARKETS Money supply M1 M2 M3 Banking system (including Islamic banks) Fund8 Loans Loan-to-fund ratio (%) Interest rates (average rates, %) 3-month interbank Commercial banks Fixed deposits: 3-month 12-month Savings deposit Weighted base rate (BR) Base lending rate (BLR) Treasury bills (3-month) Malaysian Government Securities9 1-year 5-year Movement of ringgit Special Drawing Rights (SDR) US dollar Euro 100 Japanese yen Bursa Malaysia FBM KLCI Market capitalisation (RM billion) 2022 End-July 2023 End-July RM million change (%) RM million change (%) 602,157 2,214,012 2,222,147 2,234,007 1,835,565 9.3 5.4 5.5 3.9 5.5 594,211 2,291,248 2,300,317 2,313,168 1,897,756 -1.3 3.5 3.5 3.5 3.4 82.2 July 2.70 2.01 2.20 0.69 2.92 5.97 – 3.00 3.72 82.0 July 3.50 2.71 2.89 0.96 3.67 6.68 – 3.24 3.60 End-August End-August RM per unit of change16 (%) RM per unit of change16 (%) 5.8386 4.4845 4.4834 3.2359 1.4 -7.0 9.8 17.4 6.1499 4.6385 5.0410 3.1731 -5.1 -3.3 -11.1 2.0 1,512.05 1,706.31 1,451.94 1,776.33 1 Includes the Federal Territory of Kuala Lumpur, Federal Territory of Putrajaya and Federal Territory of Labuan 2 Current Population Estimates based on the 2020 Population and Housing Census 3 Includes investment of public corporations 4 A specific trust fund established under Temporary Measures for Government Financing (Coronavirus Disease 2019 (COVID-19)) Act 2020 to finance economic stimulus packages and recovery plans 5 (+) indicates drawdown of assets; (-) indicates accumulation of assets 6 For 2023, data is at end-August 2023 7 Figures in parentheses show the unemployment rate 8 Funds comprise deposits (exclude deposits accepted from banking institutions and Bank Negara Malaysia) and all debt instruments issued (including subordinated debt, debt certificates/sukuk, commercial papers and structured notes) 9 Market indicative yield 10Preliminary 11Estimate 12 Forecast 13Revised estimate 14 Budget
 estimate excluding Budget 2024 measures 15Figures in parentheses indicates a negative value 16 Annual rate of appreciation (+) or depreciation (-) of the ringgit 17 Approximate Note: Total may not add up due to rounding ix 2.
Key Data BI 2024.indd 9 05/10/2023 8:32 PM economic outlook 2024 CONTENTS PREFACE ACRONYMS AND ABBREVIATIONS CHAPTER 1 ECONOMIC MANAGEMENT AND PROSPECTS Ekonomi MADANI: Towards a more Sustainable and Prosperous Malaysia Information Box 1.1 – Ekonomi MADANI: Memperkasa Rakyat Outlook Updates on the Budget 2023 Economic Management Opportunities and Challenges Feature Article 1.1 – Just Transitions for a Sustainable Future Information Box 1.2 – Wages as a Source of Growth Strategic Initiatives – Budget 2024 Information Box 1.3 – Mid-Term Review of the Twelfth Malaysia Plan Feature Article 1.2 – Towards Equitable Development Targeted Social Assistance Conclusion References CHAPTER 2 MACROECONOMIC OUTLOOK Overview Economy in 2023 Global Economy Information Box 2.1 – ASEAN Taxonomy for Sustainable Finance: Building a Sustainable ASEAN iii xiv 3 3 9 11 16 16 18 25 32 33 41 50 51 59 60 60 61 x Content 2024.indd 10 Content 2024.indd 10 06/10/2023 4:57 PM 06/10/2023 4:57 PM economic outlook 2024 Domestic Economy Feature Article 2.1 – Towards an Investment-Driven Economy for a Sustainable Growth in Malaysia Feature Article 2.2 – Navigating High-Impact Economic Growth through Direct Investment Outlook for 2024 Global Outlook Domestic Outlook Conclusion References CHAPTER 3 MONETARY AND FINANCIAL DEVELOPMENTS Overview Monetary Developments Performance of Ringgit Banking Sector Performance Capital Market Performance Information Box 3.1 – Key Capital Market Measures Islamic Banking and Capital Market Performance Information Box 3.2 – An update: Bolstering Islamic Finance in Malaysia Conclusion References STATISTICAL TABLES ORGANISATION OF THE MINISTRY OF FINANCE MALAYSIA 66 74 87 97 97 97 103 104 109 109 110 111 114 119 120 121 127 128 131 185 xi Content 2024.indd 11 Content 2024.indd 11 06/10/2023 4:57 PM 06/10/2023 4:57 PM economic outlook 2024 FIGURES The Economy 2024 Figure 2.1.
Global Gross Domestic Product, Trade and Inflation Growth Figure 2.2.

Selected Indicators for the Services Sector Figure 2.3.

Output of Manufacturing Sector Figure 2.4.

Savings-Investment Gap Figure 2.5.

Gross Domestic Product by Income Components Figure 2.6.

Top 10 Trading Partners Figure 2.7. International Reserves Figure 2.8.

Consumer Price Index and Producer Price Index Trends Figure 3.1.

Overnight Policy Rate Level Figure 3.2.

Comparison of Interest Rates among Central Banks Figure 3.3.
Performance of Ringgit against Selected Currencies Figure 3.4.

Banking System: Impaired Loans and Net Impaired Loans Ratio Figure 3.5.

Malaysian Government Securities Indicative Yields Figure 3.6.

Share of Foreign Holdings in Total Malaysian Government Securities Outstanding Figure 3.7.

5-Year Corporate Bond Yields Figure 3.8.

Performance of Bursa Malaysia Figure 3.9.

Performance of Selected Stock Markets Figure 3.10.


Global Sukuk Outstanding by Country 60 67 69 73 80 83 86 95 109 110 111 112 116 116 116 117 118 126 xii Content 2024.indd 12 Content 2024.indd 12 06/10/2023 4:57 PM 06/10/2023 4:57 PM economic outlook 2024 TABLES Table 2.1.

Gross Domestic Product by Sector Table 2.2.

Services Sector Performance Table 2.3.

Manufacturing Indices by Export- and Domestic-Oriented Industries Table 2.4.

Value-Added in the Agriculture Sector Table 2.5.


Gross Domestic Product by Aggregate Demand Table 2.6.

Gross Domestic Product by Income in Selected Countries Table 2.7.

External Trade Table 2.8.

Gross Exports Table 2.9.

Exports of Manufactured Goods Table 2.10.

Gross Imports by End Use Table 2.11.

Current Account of the Balance of Payments Table 2.12.

Consumer Price Index Table 2.13.

Producer Price Index Table 2.14.

Labour Market Indicators Table 2.15.

Employed Persons by Sector Table 3.1.


Banking System: Loan Indicators Table 3.2.

Banking System: Loans Outstanding by Sector Table 3.3.

Funds Raised in the Capital Market Table 3.4.

New Issuance of Corporate Bonds by Sector Table 3.5.

Bursa Malaysia: Selected Indicators Table 3.6.
Islamic Banking: Key Indicators 66 66 70 71 72 81 82 82 83 84 86 94 94 96 96 112 113 115 115 118 120 xiii Content 2024.indd 13 Content 2024.indd 13 06/10/2023 4:57 PM 06/10/2023 4:57 PM economic outlook 2024 ACRONYMS AND ABBREVIATIONS ACMF ASEAN Capital Markets Forum CBAM AFC AIBIM AiF AIRM AKPK Asian Financial Crisis Association of Islamic Banking and Financial Institutions Malaysia Academy in Factory ASEAN Insurance Regulators Meeting Credit Counselling and Debt Management Agency ALMPs Active Labour Market Policies CCA CCPT CCUS CE CET1 CMGP Carbon Border Adjustment Mechanism Consumer Credit Act Climate Change and Principle- based Taxonomy carbon capture, utilisation and storage compensation of employees Common Equity Tier 1 Capital Capital Market Graduate Programme average lending rate CMP3 Capital Market Masterplan 3 ASEAN Member States COVID-19 Coronavirus Disease of 2019 ALR AMS ASEAN Association of Southeast Asian Nations ASEAN-5 Association of Southest Asian Nations - 5 ASEAN Taxonomy ASEAN Taxonomy for Sustainable Finance ASEAN Taxonomy Board bottom 40% of household income group Bursa Carbon Exchange Bursa Malaysia-i Bank Negara Malaysia basis points Balance of Payments and International Investment Position Manual Sixth Edition Bantuan Rakyat 1 Malaysia Bursa Suq Al-Sila’ Bank Simpanan Nasional Central Bank Malaysia Act 2009 ATB B40 BCX BM-i BNM bps BPM6 BR1M BSAS BSN CBA xiv CPI CPO CPTPP CSAA CSR CSR DDI DE DFIs DIA DITO Consumer Price Index crude palm oil Comprehensive and Progressive Agreement for Trans-Pacific Partnership Centralised Shariah Advisory Authorities Central Spine Road corporate social responsibility domestic direct investment development expenditure development financial institutions direct investment abroad Digital Insurer and Takaful Operators DNSH Do no significant harm DSR DTN E&E debt service ratio National Energy Policy electrical and electronic Acronyms & Abbreviations (BI) 2024.indd 14 05/10/2023 8:07 PM economic outlook 2024acronyms and abbreviations ECF ECRL equity
 crowdfunding East Coast Rail Link GNS GOS gross national savings gross operating surplus Ekuinas Ekuiti Nasional Berhad GovTech Government Technology EMDEs Energy emerging market and developing economies Electricity, gas, steam, and air conditioning supply GPA HDI Government Procurement Act Human Development Index HGHV high growth high value e-PATH New E-Payment Platform i-MILIKI EPF ESG ETFs EU EUDR Employees Provident Fund environmental, social and governance Exchange-traded Funds European Union EU Deforestationfree Regulation EV electric vehicles FBM KLCI FTSE Bursa Malaysia Kuala Lumpur Composite Index FDI Fed FES FF FRA FSBP FTAs GCI GDP GFCF GLCs GLICs foreign direct investment United States Federal Reserve Foreign Exempt Scheme Foundation Framework Fiscal Responsibility Act Financial Sector Blueprint 2022 – 2026 free trade agreements Global Connectedness Index gross domestic product Gross fixed capital formation government-linked companies government-linked investment companies GNI gross national income IA ICD ICM ICT IFMC IFSA IFSB IILM Keluarga Malaysia Home Ownership Initiative Investment account Islamic Corporation for the Development of Private Sector Islamic Capital Market Information and Communication Technology Islamic Financial Market Subcommittee Islamic Financial Services Act 2013 Islamic Financial Services Board International Islamic Liquidity Management Corporation IKHSAN Inisiatif Operator Perkhidmatan ILMIA ILO IMD Institute for Labour Market Information and Analysis International Labour Organization International Institute for Management Development INSAN Inisiatif Usahawan Makanan INTAN Inisiatif Usahawan Tani IPOs IPR ISIC Initial Public Offerings Inisiatif Pendapatan Rakyat International Standard Industrial Classification Khazanah Khazanah Nasional Berhad xv Acronyms & Abbreviations (BI) 2024.indd 15 05/10/2023 8:07 PM economic outlook 2024acronyms and abbreviations KRI LCR LCTF LNG M&E M40 Khazanah Research Institute NACP National
 Anti-Corruption Plan Liquidity Coverage Ratio NACSA National Cyber Security Agency Low Carbon Transition Facility NADMA liquefied natural gas machinery and other equipment middle 40% of household income group NETR NGOs National Disaster Management Agency National Energy Transition Roadmap non-governmental organisations MATRADE Malaysia External Trade Development Corporation NIA National Investment Aspiration NIMP 2030 New Industrial Master Plan 2030 MEF MGII MGS MHTC MIDA MIFC MLC MoC MoU Malaysian Employers Federation Malaysian Government Investment Issues Malaysian Government Securities Malaysia Healthcare Travel Council Malaysian Investment Development Authority NIP NSNP NSRC OE OECD OIC Malaysia International Islamic Financial Centre OPEC+ New Investment Policy National Safety Net Programme National Scam Response Centre operating expenditure Organisation for Economic Cooperation and Development Organisation of Islamic Cooperation The Organization of the Petroleum Exporting Countries and its allies MIFC Leadership Council Management of Change Memorandum of Understanding OPR P2P Overnight Policy Rate Peer-to-peer financing PADU Pangkalan Data Utama MOHR Ministry of Human Resources PEKA B40 Peduli Kesihatan Scheme MPC Monetary Policy Committee PGG Principles of Good Governance MSMEs micro, small, and medium enterprises Platform Centralised Sustainability Platform MTR of the Twelfth Plan Mid-Term Review of the Twelfth Malaysia Plan MyCIF MyICE Malaysian Co-Investment Fund Malaysian Incentive Community Empowerment PPI PPR PS R&D MyWI Malaysian Well-being Index R&D&C&I Producer Price Index Program Perumahan Rakyat Plus Standard research and development research, development, commercialisation and innovation xvi Acronyms & Abbreviations (BI) 2024.indd 16 05/10/2023 8:07 PM economic outlook 2024acronyms and abbreviations RCEP RE REITs RM RWA SARa SC SDGs SJKP SJPP SESSS SLC SLDN SMEs Regional Comprehensive Economic Partnership renewable energy Real Estate Investment
 Trusts Ringgit Malaysia risk-weighted asset Rahmah Basic Contribution Securities Commission Malaysia SSL SSR STAR STR SVB TIV TSC self-sufficiency level self-sufficiency ratio Special Task Force on Agency Reform Sumbangan Tunai Rahmah Silicon Valley Bank total industry volume Technical Screening Criteria Sustainable Development Goals Twelfth Plan Twelfth Malaysia Plan, 2021 – 2025 UEFA Euro 2024 2024 UEFA European Football Championship Syarikat Jaminan Kredit Perumahan Syarikat Jaminan Pembiayaan Perniagaan Self-Employment Social Security Scheme ASEAN Senior Level Committee on Financial Integration UK US USD VBI National Dual Training System VBIAF small and medium enterprises United Kingdom United States US Dollar value-based Intermediation Value-based Intermediation Financing and Investment Impact Assessment Framework Working Committee on Capital Market Development SOCSO Social Security Organisation WC-CMD SPS SRI Skim Pekerjaan Sendiri Sustainable and Responsible Investment WCY World Competitiveness Yearbook Acronyms & Abbreviations (BI) 2024.indd 17 05/10/2023 8:07 PM xvii economic outlook 2024acronyms and abbreviations Acronyms & Abbreviations (BI) 2024.indd 18 05/10/2023 8:07 PM chap te r 1 Economic Management and Prospects 03 e konom i m a da n i: towa r ds a mor e sus ta i n a ble a nd pros pe rous m a l ays i a Information Box 1.1 – Ekonomi MADANI: Memperkasa Rakyat 09 outlook 11 16 update s on the budget 2023 econom ic m a n age me nt o pportun i t i e s a nd ch a lle nge s Feature Article 1.1 – Just Transitions for a Sustainable Future Information Box 1.2 – Wages as a Source of Growth 32 s tr ategic i n i t i at i v e s – budge t 202 4 Information Box 1.3 – Mid-Term Review of the Twelfth Malaysia Plan Feature Article 1.2 – Towards Equitable Development: Targeted Social Assistance 50 51 conclus ion r e fe r e nce s Chapter 1.indd 1 06/10/2023 7:39 PM Chapter 1.indd 2 06/10/2023 7:39 PM chapter 1 Economic Management and Prospects Ekonomi MADANI: Towards a more
 Sustainable and Prosperous Malaysia The Government has unveiled the Ekonomi MADANI: Memperkasa Rakyat framework with the vision of ‘Building a Better Malaysia Together’.
Harnessing the untapped potentials to achieve collective goals under this framework is a shared national aspiration.

This comprehensive policy framework represents the unwavering commitment to ensure a sustainable and prosperous nation.

The framework lays the foundation for Malaysia to ascend on its development trajectory and to regain the nation’s status as an Asian Tiger.

At its core, the framework concentrates on leveraging Malaysia’s innate strengths to enhance the national competitiveness.
Simultaneously, it places a profound emphasis on fiscal sustainability measures, good governance practices, and efficacious service delivery.

Furthermore, this framework is responsive to the current challenges faced by the rakyat, particularly the escalating cost of living, while addressing pertinent structural issues related to wages and productivity.
information box 1.1 Ekonomi MADANI: Memperkasa Rakyat Introduction The Ekonomi MADANI: Memperkasa Rakyat framework was launched by YAB Dato’ Seri Anwar Ibrahim on 27 July 2023.

This framework focuses on two main objectives, namely restructuring the economy and improving the quality of life of all Malaysians.

The overarching goal of the framework is to build a better and sustainable Malaysia.
The framework is envisaged to be implemented through the whole-of-nation approach which requires the mobilisation of resources and collective efforts from various stakeholders including the government, private sector, government-linked companies (GLCs), non-governmental organisations (NGOs) and rakyat as a whole.
In the pursuit of this framework, the Government emphasises on enhancing two main thrusts, namely, “Raising the Ceiling” to strengthen the economy and grow the wealth of the nation; and secondly “Raising the Floor” to ensure quality and equitable benefits for all as shown in Figure 1.1.1.

The framework consists of both short- and medium-term measures to drive the achievement of these two thrusts.
The framework will serve as a foundation and complement recently announced policies, including the National Energy Transition Roadmap (NETR), the New Industrial Master Plan 2030 (NIMP 2030) and the Mid-Term Review of the Twelfth Malaysia Plan (MTR of the Twelfth Plan).

3 Chapter 1.indd 3 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 chapter 1 ECONOMIC MANAGEMENT AND PROSPECTS FIGURE 1.1.1.
Ekonomi MADANI Framework EKONOMI MADANI : MEMPERKASA RAKYAT Building a Better Malaysia Together Raise the Ceiling Leading Asian Economy Raise the Floor Quality & Just Life for All To succeed requires an all-of-Malaysia approach (Rakyat, Government & Industry) In the spirit of unity Good governance (rooting out corruption) Agile & collaborative public delivery system Malaysia Anchored on MADANI Values [Sustainability, Prosperity, Innovation, Respect, Trust and Care & Compassion] Ensuring ethical underpinnings in pursuit of progress, institutional reform and societal cohesion Source: Prime Minister's Office of Malaysia Envisioned Targets The framework is a holistic approach designed to address various challenges and concerns.
The short-term measures aim to address pressing issues that directly affect both the rakyat and the economy, while the medium-term measures focus on raising the country’s performance in various aspects.

Short-Term Targets The framework sets short-term targets for the improvement of various ongoing initiatives to address pressing issues affecting the rakyat and businesses.

These efforts include: i.


A ccelerating the implementation of projects, particularly those aimed at upgrading dilapidated schools and clinics.

Various efforts have been undertaken, such as increasing allocations, simplifying procurement procedures, and delegating powers to the implementing authorities to expedite the execution of the projects; and ii.
Eradicating hardcore poor through the roll-out of Inisiatif Pendapatan Rakyat to provide opportunities to increase and diversify income that enables financial independence and resilience.

The Payung RAHMAH Concept has also been introduced to ease the financial burden of the rakyat and continues to be strengthened in addressing the cost of living challenges.
Medium-Term Targets On a larger scale, the Ekonomi MADANI framework outlines the country’s economic direction with medium-term targets t o raise the performance of the country in various aspects.

The framework sets seven key performance indicators to be achieved by Malaysia within a period of 10 years, as shown in Figure 1.1.2.

4 economic outlooK 2024 Chapter 1.indd 4 06/10/2023 7:39 PM chapter 1 ECONOMIC MANAGEMENT AND PROSPECTS FIGURE 1.1.2.
Seven Key Performance Indicators 1 2 3 4 Top 30 largest economy Top 12 in global competitiveness Top 25 on the Human Development Index Increase labour share of income to 45% 5 6 7 Improve Malaysia’s position in the Corruption Perception Index to Top 25 Towards fiscal sustainability, targeting deficit of 3%, or better Increase female labour force participation rate to 60% Source: Prime Minister’s Office of Malaysia Main Thrusts The thrusts are structured to achieve the targets to build a better Malaysia, which is supported by Focus 1: Malaysia - Leading Asian Economy and Focus 2: Elevating Quality of Life for The Rakyat.
Focus 1: Malaysia - Leading Asian Economy To position Malaysia as a leader in the Asian economy, the economic structure requires a transformation from a labour-oriented to an innovation-led economy driven by highly productive and internationally competitive firms.

This effort will involve the revitalisation of the industrial sector, more efficient resource allocation and distribution of goods and services, to drive towards vibrant economic growth supported by more sustainable fiscal policy.
In achieving this, the main initiatives are as follows: i.

A Regional (ASEAN) Agenda For Malaysia to achieve an annual GDP growth between 5.5% to 6%, the country needs to foster greater economic integration with the neighbouring countries; nurture more highly competitive local companies to penetrate the ASEAN market; and facilitate trading activities, especially in facing the global supply chain issues.
Furthermore, the country needs to increase its global competitiveness; focus on higher value-added activities or economic sophistication; and strengthen outcome-based tax incentives that support companies with high-impact activities.

ii.

Malaysia as an Investment Destination In promoting Malaysia as a prime investment destination, efforts need to be intensified in upgrading the industrial areas with more resilient and sustainable infrastructure.
Likewise, greater emphasis must be placed on strengthening the investment promotion agencies and reviewing investment incentives to generate high-paying jobs and fully utilise local resources.

economic outlooK 2024 5 Chapter 1.indd 5 06/10/2023 7:39 PM iii.
Internationalising Local Start-ups and Small and Medium Enterprises (SMEs) The GLCs are encouraged to continuously drive domestic direct investment (DDI) and support the development of local vendors in strategic sectors such as E&E, the digital economy and aerospace.

This effort will push more start-ups and Bumiputera SMEs to venture into new growth areas.
In addition, the Government also aspires to boost export growth as well as spawn more successful local unicorns and public-listed companies, among others, through the enhancement of the R&D&C&I ecosystem.

In this respect, a conducive financing ecosystem and dynamic financial market will be needed to support these efforts.

iv.
iv.

Leader of the Global Islamic Economy As Malaysia solidifies its position as the leader of the global Islamic economy, the comprehensive financial ecosystem will be modernised, centering on the Maqasid Shariah1 principles.

In line with the Ekonomi MADANI framework, the Government will collaborate with Islamic financial industry players to offer more digitalised, innovative and diversified Islamic financial instruments by leveraging Islamic social finance such as zakat, waqf and sadaqah.
A sustainable and effective Islamic finance that encompasses the halal and tayyib 2 principles will be aligned with the growing global environmental, social and governance (ESG) funds.

v. Micro Entrepreneurs and the Informal Sector The development of micro-enterprises and the informal sector are essential to encourage wider participation of entrepreneurs while adding value to the economy.
However, access to financing remains crucial to ensure the success of micro, small and medium enterprises (MSMEs) as well as the informal sector, particularly in the adoption of digitalisation and other emerging trends.

Therefore, microfinance institutions and established start-ups will be the game changers to encourage both MSMEs and the informal sector to innovate through alternative financing such as equity crowdfunding (ECF).

vi.
vi.

Green Growth for Climate Resilience In the country’s endeavour towards achieving net-zero aspiration by as early as 2050, low-carbon and climate-resilient elements will be emphasised in Malaysia’s development planning to shape a more efficient and sustainable economic landscape.

Under the NETR, the Government aims to accelerate the energy transition to ensure a continuous and sustainable supply of clean energy for all.
This aspiration will include increasing renewable energy generation capacity, installation of solar panels on government buildings, as well as renewable energy trading policy through the electricity market system.

The Government will also continue to spearhead efforts to pioneer the hydrogen economy and carbon capture, utilisation and storage (CCUS) while continuously providing incentives specifically to encourage such new green growth activities.
1 Maqasid Shariah refers objective of Shariah to the preservation of religion, life, intellect, lineage and wealth (property).

2 Tayyib refers to wholesome, pure, healthy and safe.

6 Chapter 1.indd 6 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 vii.

Land Use and Food Security Malaysia will reassess the approach towards land use to balance between developmental, agricultural and conservation needs.
This is crucial in ensuring the optimisation of the land to address food security while conserving biodiversity assets.

In this endeavour, the Government will further improve the self-sufficiency ratio (SSR) and enhance food security by optimising the use of existing agricultural land through technology adoption, improving irrigation infrastructure as well as providing financing facilities, particularly for modern agricultural technology applications.
In addition, the creation of nature-based solutions through conservation and reforestation efforts will be intensified to improve environmental integrity.

Focus 2: Elevating Quality of Life for the Rakyat Recognising the need to raise the standard of living for all Malaysians, the Ekonomi MADANI framework will emphasise on building a more equitable and prosperous society with a fair distribution of wealth.

This aspiration will be achieved through the following strategies: i.
Job Opportunities with Meaningful Wages In achieving a more balanced economic sharing, the Government will improve policies to increase wage growth, which includes reviewing the minimum wage and relevant laws to warrant a better working environment as well as exploring the implementation of a progressive wage model.

These measures aim to increase the share of compensation of employees to 45% of GDP to be at par with developed countries.
Furthermore, the Government will implement multi-tiered levy to reduce the dependency on low- skilled foreign workers while encouraging automation.

ii.

Equal Opportunity Malaysia will continue efforts to reduce inequality across gender, race and background to ensure inclusive growth.

Priority is given to hardcore poor and marginalised groups by giving more assistance and equitable opportunities for education.
Efforts will also be continued to intensify entrepreneurial training and strengthen financing programmes for specific groups, especially women and youth.

Besides, a region-specific industrial policy will foster the niche areas within states to narrow regional development gaps.

The world- class infrastructure in major cities will be further enhanced to increase urban liveability and sustainability as well as boost attractiveness as an investment hub.
Legal and regulatory aspects as well as support programmes will be improved to increase women’s participation in the labour market by strengthening the Care-Economy initiatives such as affordable childcare centres.

iii.

Social Protection for All The comprehensive social protection system will be enhanced through three broad areas, namely social insurance, social assistance and labour market intervention to safeguard the rakyat from unforeseen circumstances.
These initiatives include gradually expanding the coverage of the Employees Provident Fund (EPF) and Social Security Organisation (SOCSO) 7 Chapter 1.indd 7 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 to the informal sector as well as enhancing cash assistance programmes and the Rahmah programme to provide a higher social protection floor.
In addition to building retirement resilience, the Government also continues to intensify the labour market by raising wages through upskilling and reskilling programmes.

iv.

Healthcare Service Reforms The Government remains committed to improving the rakyat’s overall wellbeing by providing universal access to quality healthcare services.

In this respect, a whole-of-society primary healthcare approach will be adopted to create a more sustainable, resilient, and quality healthcare system.
The rakyat will be further inculcated to embrace a self-reliant transition from the treatment of diseases to the disease prevention concept, in order to improve, protect and maintain their health.

In this regard, the Government will commit to 5% of healthcare expenditure to GDP as stipulated in the Health White Paper.

v. Educational and Human Resource Reforms Various efforts have been made to provide comprehensive education facilities and a conducive learning environment which is accessible to all.
These efforts include expediting the implementation of school projects, improving conditions of dilapidated schools as well as broadening internet access through the JENDELA project.

Furthermore, tertiary education and lifelong learning programmes, including TVET, will be reviewed to be more demand- driven in producing future-proof talent required by the industries.

vi.
vi.

Infrastructure and Public Transportation The Government will take immediate action to optimise all existing assets related to rural roads and urban public transportation systems to reduce traffic congestion, increase connectivity and enhance mobility.

The management of land public transport will be consolidated to increase cost-effectiveness and improve last-mile connectivity.

In addition, the air connectivity network as well as land transport infrastructure in major cities will also be improved.
vii.

Basic Amenities The Government remains steadfast in offering world-class universal basic infrastructure for the rakyat including access to the continual supply of quality water, electricity and internet.

In addition, flood mitigation projects will be expedited to ensure local communities are cushioned from the severe impact of floods or any disruptions to access basic amenities.

viii.
viii.

Affordable Housing for All Malaysians The National Housing Policy (2018 – 2025) is formulated to ensure the adequacy of the housing supply, and fostering safe, healthy and harmonious living environment.

In realising this policy, an action plan is being developed to ensure more meaningful parameters are set to strike a balance between median house prices and median income level.
In addition, the provision of public housing will also be improved while the rental market will be revitalised to meet the demand.

The Government will also facilitate the buyers to secure home financing by providing up to 120% credit guarantee under the Syarikat Jaminan Kredit Perumahan Berhad (SJKP).
8 Chapter 1.indd 8 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 Good Governance to Restore Confidence Good governance and efficient public service delivery form the foundation to gain the trust of all stakeholders to support and undertake collective action towards the required transformation.

Structural and institutional reforms of the Parliament, media and public services will strengthen governance and institutional capacities.
An agile public service delivery supported by the digitalisation agenda is imperative to drive economic transformation while adapting to the evolving global realities.

The Government will also focus on progressively enhancing Malaysia’s fiscal sustainability by implementing various revenue and expenditure strategies.

A more sustainable, efficient and targeted subsidy mechanism is pertinent to address leakages and wastages.
Conclusion The Ekonomi MADANI framework is envisioned to propel Malaysia’s economic development.

The framework, which is anchored on “Raising the Ceiling” and “Raising the Floor”, aims to enhance the nation’s economic prosperity and promote greater inclusivity in wealth distribution, thereby improving the living standards of the rakyat.
This whole-of-nation approach is expected to uphold the spirit of unity and good governance, supported by an agile and collaborative delivery system to drive overall economic growth.

Ultimately, the successful implementation of the Ekonomi MADANI framework will revive Malaysia as Asia’s most important economic axis, restoring the nation’s dignity and glory.
Outlook Global Economy As the world endures constant changes with varying paces of growth across the globe, the global economy is anticipated to exhibit moderate growth after experiencing a period of economic downturn.

The growth pace is projected to persist across most regions in the upcoming years.

Lingering uncertainties have prompted the IMF1 to project the global growth outlook to 3% in 2023 and 2024 (2022: 3.5%).
Nevertheless, it remains constrained due to heightened downside risks, particularly tightening of monetary policies to ease inflationary pressures, hence, impeding a robust global economic recovery.

Meanwhile, world trade growth is also expected to moderate to 2% in 2023 amid prolonged geopolitical tensions and to record 3.7% in 2024.

The evolving global landscape is poised to exert a significant influence on businesses of all sizes and affect the standard of living.
In addition, escalating supply chain security concerns could prompt the imposition of trade and investment restrictions, potentially impacting the growth prospects of others.

While the global challenges stemming from the crisis still persist, it offers countries the opportunity to foster growth and innovation through the formulation of effective strategies aimed at achieving more sustainable and robust growth.

1 Refers to World Economic Outlook report published in July 2023.
9 Chapter 1.indd 9 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 Domestic Economy Despite escalating uncertainties in the global landscape, Malaysia's economy remains resilient.

The GDP is forecast to expand by approximately 4% in 2023 and between 4% and 5% in 2024.

The Government acknowledged the World Bank's forecast that Malaysia's growth will be 4.3% in 2024, which is slightly higher than its initial estimate.
This is in line with Malaysia’s 2024 growth projection, which will be achieved through robust domestic demand, effectively offsetting the challenges posed by the moderate global growth, supported by the implementation of measures in the new National Energy Transition Roadmap (NETR), New Industrial Master Plan 2030 (NIMP 2030), and the Mid-Term Review of the Twelfth Malaysia Plan (MTR of the Twelfth Plan).
Furthermore, Malaysia’s domestic demand in 2023 continues to be buoyed by expansion in consumption and investment spending.

This is also supported by favourable labour market condition and easing inflationary pressures as well as vibrant tourism activities.

The surge of private investment is attributed to the multi- year execution of infrastructure ventures and sustained capital investments in the services and manufacturing sectors.
The robust activity in private sector expenditure is expected to offset the effects of moderate public spending in 2023.

In 2024, private sector expenditure remains as the main contributor in driving economic activities owing to stronger domestic demand.

In addition, Government initiatives to support household spending through cash transfers to targeted groups and the growing social commerce trend are expected to boost private consumption.
Meanwhile, private investment is poised to accelerate further driven by improved business environment in consonance with positive response towards Government’s strategies and measures in attracting high-tech and high-value investments via the NETR and NIMP 2030.

10 On the supply side, services and manufacturing sectors continue to be the primary engines of growth in 2023.

The services sector performance is driven by tourism subsectors, resulted from higher tourist arrivals and improved consumer spending.
However, the manufacturing sector is expected to register a modest growth amid sluggish external demand.

Likewise, agriculture sector is projected to expand moderately contributed by the oil palm, other agriculture and livestock subsectors, while the mining sector is anticipated to decline due to lower external demand for liquefied natural gas (LNG).
On the other hand, the construction sector is expected to record better performance supported by the acceleration of ongoing infrastructure and utilities projects.

In 2024, the wholesale and retail trade subsector will remain as the key contributor to the services sector, underpinned by the expansion in retail segment through digital transactions.
In addition, the domestic-oriented industries are backed by higher output in high growth high value (HGHV) industries which will drive the manufacturing sector, in tandem with the implementation of initiatives under the NETR, NIMP 2030 and MTR of the Twelfth Plan as well as Chemical Industry Roadmap 2030.

Agriculture sector remains steady partly attributed by expected increase in oil palm production and crude palm oil (CPO) prices.
The mining sector is forecast to recover mainly contributed by the new gas field projects such as Gansar, Jerun and Kasawari.

Meanwhile, the construction sector continues to grow supported by growth in all subsectors, partly by the increasing demand in renewable and clean energy as well as decarbonisation, in line with the green economy agenda.
In 2023, exports have contracted in tandem with the global economic and trade slowdown, primarily influenced by China’s slower-than- anticipated economic growth and moderate commodity prices.

In contrast, the current account surplus is expected to expand, Chapter 1.indd 10 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 driven by a narrowing deficit in the services and primary income accounts.
However, the outlook for 2024 indicates a gradual upswing, attributed to improved global trade and prospects in the commodity sector.

Monetary and Financial Developments The current monetary policy stance remains accommodative and supportive of the economy in tandem with the assessment of the inflation and growth prospects.
The financial sector is envisaged to remain resilient and stable, driven by a robust banking system which continues to support financial intermediation activities, benefitting from positive growth projections and an improving labour market.

Simultaneously, the capital market remains vibrant in fostering Malaysia’s prosperity, inclusivity, and sustainability by leveraging thought leadership, intensifying innovation, and diversifying the market’s range of products to remain competitive.
Going forward, the Malaysia's Capital Market Masterplan 2021 – 2025 and Financial Sector Blueprint 2022 – 2026 will continue to serve as invaluable guiding documents, setting forth the visions and strategies for the development of the capital market and financial sector.
Updates on the Budget 2023 In line with the forward-looking vision under the Malaysia MADANI concept, the formulation of Budget 2023 was premised on the three pillars, namely inclusive and sustainable economic growth, institutional reform and good governance, as well as combatting inequality through social justice.
In pursuit of this vision, a substantial total allocation of RM386.3 billion has been allocated in Budget 2023, with RM289.3 billion designated for operating expenditure (OE) and RM97 billion specifically channelled towards development expenditure (DE).

As of July 2023, 49% of the total allocation has been utilised, with RM166.7 billion spent for OE, while the remaining was for DE.
Pillar 1: Inclusive and Sustainable Economic Growth Towards achieving an inclusive and sustainable economic growth, a series of measures have been laid to focus on sustainable fiscal conditions, rakyat’s wellbeing, effective disaster risk management, and high-impact investments.
Under the fiscal legislative reform, the enactment of the Public Finance and Fiscal Responsibility Act (FRA) this year will enhance the credibility of fiscal policy conduct towards achieving long-term public finance sustainability and macroeconomic stability.

This act serves as a robust fiscal management framework, with an emphasis on good governance, accountability, and transparency in managing public finance.
Comprehensive measures were implemented to support businesses and the needs of the rakyat, with a special focus on micro, small, and medium enterprises (MSMEs) that were badly affected by the pandemic.

As of July 2023, Bank Simpanan Nasional (BSN) extended a financing facility amounting to RM145.3 million, benefitting 4,747 entrepreneurs, including hawkers.
Furthermore, through the TEKUN Nasional financing schemes, a substantial 80% of RM263.9 million was disbursed to empower 16,960 young entrepreneurs, primarily for the acquisition of assets and working capital.

Additionally, small and medium enterprises (SMEs) could tap into a RM9.7 billion financing facility provided by BNM, along with a maximum guarantee facility of 90% from Syarikat Jaminan Pembiayaan Perniagaan (SJPP) for a total loan up to RM20 billion.
As at end-July 2023, a total amount of RM5.7 billion was successfully guaranteed, directly benefitting over 7,000 SMEs.

These comprehensive measures signify continuous efforts towards fortifying the economic backbone of the nation.
11 Chapter 1.indd 11 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 In bolstering the nation’s responsiveness to natural disasters and calamities, the Government is committed to enhancing disaster risk reduction, management, and preparedness through a multifaceted approach of programmes and incentives.
In pursuit of long-term flood mitigation goals, the year 2023 witnessed the initiation of various projects centred on flood management strategies, dual-purpose flood mitigation reservoirs, and integrated river basin management endeavours in Johor, Selangor, and Kelantan.

Simultaneously, approximately RM1.5 billion was allocated to National Disaster Management Agency (NADMA), the armed forces, Fire and Rescue Department, as well as RELA to elevate the country’s rescue teams’ disaster response.
Additionally, a total of RM1.6 million was channelled through the Malaysian Incentive Community Empowerment (MyICE) programme, in collaboration with relevant NGOs aimed at empowering 159 communities, as the first line of defence against natural disasters.

These concerted efforts underscore a resolute commitment to safeguard lives and livelihoods during times of crisis.
Moreover, the Government has proactively promoted sustainability within the business community by supporting sustainable technology start-ups, facilitating the adoption of low carbon practices by SMEs, and fostering the growth of sustainable green economy.

Notably, the Low Carbon Transition Facility (LCTF) initiated by BNM has proven to be instrumental in aiding local SMEs undertaking sustainable start-up ventures and implementing environmentally conscious practices.
As of July 2023, 144 applications have been approved amounting to RM273.3 million.

Furthermore, recognising the potential of the Islamic economy, the Government is committed to leveraging its strengths by exploring innovative financial instruments including development of underutilised registered waqf lands.

In this regard, a substantial allocation of RM200 million has been dedicated to develop 12 waqf land in Penang, with a projected gross development value exceeding RM1 billion.
This investment underscores the Government’s dedication to unlocking the untapped potential of the Islamic economy and promoting sustainable development through innovative and prudent financial strategies.
Pillar 2: Institutional Reforms and Good Governance to Restore Confidence In a concerted effort to bolster the long-term sustainability of the nation and strengthen public confidence, solid institutional reforms and commitments to good governance are vital to elevate the efficiency and effectiveness of the public service delivery.
The Budget 2023 has outlined a comprehensive set of measures on accelerating public infrastructure project implementation, empowering public-private partnership, prioritising the digital agenda as well as strengthening the role of government- linked companies (GLCs) and agencies.

These strategic measures are envisioned to shape a dynamic and resilient foundation for the nation’s growth trajectory, demonstrating a strong commitment to transparency and accountability in the pursuit of economic progress.
In expediting the execution of public infrastructure projects, significant improvements have been instituted to enhance the transparency of government procurement, including simplification of procedures and processes, particularly for smaller projects by introducing flexibility and exceptions to Treasury Instruction 182.
The initiative empowers ministries and agencies at the state and district levels in Sabah and Sarawak, through the technical departments to implement projects with a threshold value of up to RM50 million.
Meanwhile, RM2.6 billion has been disbursed as of August 2023 to rehabilitate dilapidated schools and clinics, maintain and upgrade federal roads, enhance Chapter 1.indd 12 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 and construct new rural roads, and install street lights in high-risk areas.
These projects underscore the Government’s unwavering commitment to uplifting critical public infrastructure, thus bolstering community wellbeing and augmenting nationwide development.

The Budget 2023 places a significant focus on human capital, particularly the development of TVET graduates with skillset tailored to industry demands through collaboration of 50 companies primarily GLCs with TVET institutions.
These institutions include community colleges, industrial training and national youth skills institutes.

As of July 2023, 10 Management of Change (MoC) agreements have been signed that outline the agreed scopes of collaboration, covering transfer of knowledge, sharing of equipment, and development of curriculum.

Furthermore, in order to bolster industrial cooperation, RM17 million has been spent for the National Dual Training System (SLDN), benefitting over 8,000 trainees.
Concurrently, as at end-July 2023, RM2.6 million has been spent under the Academy in Factory (AiF) programme to train 20,000 trainees on the jobs.

These programmes reflect the Government’s dedication to enhancing the skillset and employability of TVET graduates, contributing to a dynamic and skilled workforce that are crucial for the nation’s progress.
In the effort to encourage youth to enhance skills and promote higher wages in the private sector, RM55.3 million has been allocated for a partnership programme with industry players aiming to employ 17,000 TVET graduates.

More than 6,500 TVET graduates have benefitted since its launch in May 2023.

Furthermore, the Government remains dedicated to creating meaningful employment opportunities for vulnerable groups, such as gig workers, school leavers and unemployed graduates.
As of July 2023, over 760,000 participants were enrolled in upskilling and reskilling training programmes, with funding from the Human Resource Development Fund amounting to RM900.8 million.

As Malaysia gears up for higher tourists arrival, the Government is intensifying efforts to fortify the tourism sector in conjunction with the Visit Malaysia promoting campaign.
A notable allocation of RM65 million has been directed towards programmes and activities centred around promoting culture and heritage as well as enriching the tourist experience.

Additionally, pivotal infrastructure projects are underway to mitigate traffic congestion in popular tourist destinations.

These initiatives encompass the construction and enhancement of roads in high-traffic areas like Cameron Highlands and Melaka.
Moreover, strategic projects include the development of new roads and bridges to connect Port Dickson and Sepang, as well as the enhancement of the North-South Expressway, with an initial focus on Johor for Phase 1.

These infrastructure improvements underline the Government’s dedication to providing a seamless and enjoyable experience for tourists, improving accessibility and connectivity across the nation’s vibrant tourist spots.
In advancing the national digitalisation agenda, RM199 million has been channelled through the JENDELA initiative to boost internet penetration, aiming for full 4G coverage across all populated areas in Malaysia.

Additionally, an expansion of fibre broadband accessibility is projected to reach 9 million premises by 2025.

As of December 2022, 4G coverage has reached an impressive 96.9% of populated areas, benefitting approximately 7.7 million premises with access to fibre broadband.
In the course of this initiative, Phase 2 of JENDELA will concentrate on reaching the remaining rural and remote areas, ensuring inclusivity in the digital landscape.

Furthermore, by the end of 2022, the rollout of the 5G network has reached 47.1% of total populated areas, surpassing the initial target of 37.9%.
This progress underscores the Government’s dedication in providing widespread, high-quality digital connectivity to propel Malaysia into a technologically advanced future, fostering innovation and catalysing economic growth.
13 Chapter 1.indd 13 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 The Government has taken significant measures to bolster the role of the National Cyber Security Agency (NACSA) as the agency is tasked to spearhead efforts in enhancing the country’s legal framework and coordinating initiatives to combat cyber security threats effectively.
An allocation of RM10 million was dedicated to the development of the National Scam Response Centre (NSRC), which is scheduled to be fully operational by the end of 2023.

For the period from October 2022 to June 2023, the NSRC managed to address more than 15,500 online fraudulent activities.

Additionally, in strengthening the security of customers’ online banking experiences, BNM has mandated a “kill switch” policy for all banking institutions.
This strategic policy has been successfully implemented by several banks, reinforcing the security measures and raising customers’ confidence in online banking transactions.

These multipronged strategies underline the Government’s commitment in fortifying cyber security and preserving the integrity of the nation’s digital landscape.

The Government is committed to fuel innovation within start-up companies and bolster the local enterprise ecosystem.
The government-linked investment companies (GLICs) and GLCs have emerged as pivotal players with significant venture capital investments.

Khazanah, through Dana Impak has allocated RM1 billion, earmarked to support local start-up companies, demonstrating a clear commitment to nurturing innovation and entrepreneurship.

Simultaneously, Ekuiti Nasional Berhad (Ekuinas) has diligently managed the Dana Asas, amounting to RM100 million to accelerate companies’ growth and enhance Bumiputera equity.
Furthermore, an additional RM40 million is offered to MSMEs through the Malaysian Co-Investment Fund (MyCIF) by the Securities Commission (SC) in the form of equity crowdfunding (ECF) and Peer-to-Peer Financing (P2P).

These combined initiatives underscore a comprehensive approach by the Government and relevant bodies to actively promote a thriving start-up ecosystem, propelling innovation and economic growth in Malaysia.
14 Pillar 3: Combatting Inequality Through Social Justice The Budget 2023 is focused towards pursuing institutional reforms and advocating social justice.

Key initiatives are aimed at eradicating hardcore poverty, mitigating the effects of the rising cost of living, fostering harmony and unity within society, and ensuring the provision of high-quality basic amenities for all.
Towards these, the Inisiatif Pendapatan Rakyat (IPR) programme is introduced to eradicate hardcore poverty and raise the income of the poor and vulnerable families.

A sum of RM750 million has been allocated for this initiative through three sub-programmes, namely Inisiatif Usahawan Tani (INTAN), Inisiatif Usahawan Makanan (INSAN) and Inisiatif Operator Perkhidmatan (IKHSAN).
As of July 2023, all initiatives have been implemented with a total disbursement of RM82 million that benefitted more than 3,000 recipients.

Furthermore, the Government has pledged to continue implementing a range of initiatives in the form of cash assistance and in-kind transfers to assist the vulnerable households.
As of July 2023, RM10.4 billion of cash assistance has been transferred to 15.9 million recipients from the hardcore poor families, B40 households, youth and students in higher education institutions.

This includes Sumbangan Tunai Rahmah (STR), Rahmah Basic Contribution (SARa) and eBeliaRahmah initiatives.

In addition, to ease the financial strain on the M40 group, the income tax rate for resident individuals is reduced by 2% for the chargeable income range of RM35,000 to RM100,000.
Meanwhile, the Government also introduced the Payung Rahmah initiative to alleviate the rising cost of living.

This includes the Rahmah Menu, engaging over 15,000 eateries to provide affordable complete meals at RM5 as well as the Rahmah Sales Programme, with an allocation of RM100 million, offering essential goods at up to 30% lower prices than the local market.
Chapter 1.indd 14 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 The Community Drumming Programme continues to enable rural and remote area residents especially in Sabah and Sarawak to purchase seven essential items at government- set reduced prices.

These items namely coarse refined white sugar, cooking oil, wheat flour, rice, liquefied petroleum gas, RON95 petrol, and diesel.
On top of the subsidies provided to these items, the Government absorbs the transportation and distribution costs to ensure the price remains affordable for the residents.

In 2023, this programme was given an additional allocation of RM25 million compared to RM200 million in the previous year, with the scope expanded to 25 new zones including Paloh and Passin in Sarawak, Pasir Raja in Terengganu, and Kuala Krai in Kelantan.
Amid the harsh impact of the pandemic, the social protection system is enhanced to include self-employed individuals with social insurance coverage under the Self-Employment Social Security Scheme (SESSS).

Under this initiative, the Government provided RM100 million to incentivise self-employed contributors, covering 80% of the contributions for Skim Pekerjaan Sendiri (SPS) Padanan Caruman and 100% for SPS MADANI.
As at end-July 2023, RM38.6 million has been disbursed, benefitting more than 180,000 recipients.

In addition, the Government continues to provide various social programmes which include for disabled workers, non-working disabled individuals, indigenous communities, SME women entrepreneurs, senior citizens, and private care institutions for senior citizens, children and persons with disabilities operated by NGOs with an allocation of about RM2 billion.
As of July 2023, a sum of RM1.1 billion has been disbursed to these groups.

In providing accessible healthcare, the MADANI Medical Scheme was introduced in June 2023 with an allocation of RM100 million.

This initiative facilitates acute primary care treatment for the B40 at private clinics and at the same time reduces congestion at the emergency department in public hospitals.

Additionally, the Peduli Kesihatan Scheme (PEKA B40) allocates RM80 million to offer extensive healthcare support.
The scheme encompasses health screenings and incentives for completing cancer treatments, and transportation support to the public health facilities.

As at end-July 2023, more than RM50 million has been disbursed for these programmes.

Furthermore, tax relief threshold on medical expenses has been increased from RM8,000 to RM10,000 for the 2023 assessment year.
The relief was extended to cover the cost of rehabilitation treatment for children with learning disabilities such as Down Syndrome, Autism, and Specific Learning Disabilities.

In the effort to bolster the agriculture sector and address the food security concern, RM1 billion is provided under the BNM’s Agrofood Financing Scheme.

As of July 2023, RM266.7 million has been disbursed to 372 recipients.
Moreover, to further augment agricultural production, the Government has earmarked RM40 million to collaborate with several state governments to implement agro-food projects and support technology adoption.

In addition, in order to assist paddy farmers in enhancing productivity, various subsidies and incentives totalling RM1.6 billion have been provided including seeds, fertilisers and prices.
In pursuing the development of Sabah and Sarawak, a total of RM6.5 billion and RM5.6 billion, respectively were assigned under the development allocation for 2023.

Efforts are underway to accelerate the construction of public infrastructure projects in Sabah and Sarawak including the Sabah Pan-Borneo Highway and Sarawak-Sabah Link Road.
Moreover, public amenities in Sabah and Sarawak particularly in rural area have also been improved with the expansion of road and street lighting; improving water and electricity supply as well as increasing of healthcare facilities and schools.

As of July 2023, a total of RM1.9 billion and RM2.2 billion has been spent on development in Sabah and Sarawak, respectively.
15 Chapter 1.indd 15 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 Economic Management Having effectively managed the most severe impacts of the COVID-19 pandemic, Malaysia’s economy is now confronted with persistent uncertainties stemming from prolonged geopolitical tensions, global inflationary pressures, monetary policy tightening and the increasingly adverse effects of climate change.
In response to these multifaceted challenges, the Government’s efforts are anchored towards prudent fiscal management, quality investment, digital economy and food security.

Similarly, the Government is determined to rebuild investor confidence by undertaking institutional reforms, focusing on transitioning to green economy, promoting practices of good governance, streamlining public service delivery, and advocating wage growth.
Efforts are also undertaken to protect the most vulnerable groups in the society by actively addressing the challenges posed by the rising cost of living, striving for balanced regional development, expanding the social protection system, and upgrading the quality of infrastructure.

Opportunities and Challenges Sustainable Economic Growth Fiscal Sustainability Long-term fiscal sustainability is important for the Government to continue supporting inclusive and sustainable economic growth.
The ongoing effort to improve fiscal position will focus on improving revenue mobilisation, eliminating spending leakages and wastages, managing debt effectively and increasing investor confidence in the long term.

The upcoming FRA will further enhance and strengthen the governance and fiscal discipline in managing the nation’s finances.
While the economy is showing recovery momentum, external challenges, such as the global economic slowdown and persistent geopolitical tensions are expected to pose risk to the fiscal position, trade, investment, and economic 16 growth.

Thus, a more sustainable fiscal position enables the Government to respond to changes in economic conditions and provide a buffer to the economy and the rakyat against adverse shocks.
Quality Investment Creating a desirable investment ecosystem necessitates comprehensive policies to attract capital, stimulate innovation, and generate well-compensated employment.

Enhancing the nation’s capacity to harness quality investments particularly through R&D can nurture innovation and bolster trade activities.
Additionally, it is important for the nation to adapt to the dynamics of the global economic and geopolitical shifts to enhance competitiveness as well as attract and sustain top-tier investments.

In 2023, Malaysia’s ranking in the World Competitiveness Yearbook (WCY) by the International Institute for Management Development (IMD), improved to 27th from 32nd in 2022.

Key strengths include cost competitiveness in terms of prices, robust infrastructure, and favourable tax policies.
However, specific challenges pertaining to the need for a future-ready talent pool, investment-friendly ecosystem and comprehensive regulatory reforms at both national and sub-national levels have to be addressed to enhance the ease of doing business.

This involves foreign direct investment (FDI) and domestic direct investment (DDI) that will elevate human capital quality, promote R&D, and drive digitalisation initiatives.
As the world moves towards sustainability and decarbonisation, progress in the field of sustainable, low carbon and resilient investment have now become another focus area.

In addition to attracting investments from larger corporations, it is crucial to provide ample business and investment opportunities to MSMEs, which currently constitute approximately 97.4% of total establishments and contribute more than 38% to the GDP.
Given the substantial role and potential to fortify the local economy, nurturing MSMEs Chapter 1.indd 16 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 through high value-added activities and high- tech investments are essential.

Encouraging closer linkages with both foreign and domestic investors will further bolster the growth and sustainability of MSMEs, ultimately enhancing the overall economic landscape.
Digital Economy Digital economy is an important enabler to drive Malaysia towards equitable, inclusive, and sustainable growth.

As envisaged in the MTR of the Twelfth Plan, the digital economy is expected to contribute at least 25.5% to the overall GDP by 2025 and position Malaysia as the regional leader by 2030.

These targets will be supported by high internet penetration rate which currently recorded at 96.9% and faster internet connection with the average speed of more than 110 Mbps.
In addition, a significant leap towards technological advancement in the public sector has also been achieved through the digitalisation of Federal Government online services.

However, challenges related to the digital divide persist due to limited broadband coverage and internet connectivity in underserved areas.
Thus, it is crucial to bridge inequalities in the utilisation of digital product and service across different societal segments by facilitating wider access to financing for businesses and intensifying digital skills.

Furthermore, there is a need to address regulatory concerns, especially regarding personal data protection and cyber security as a result of the current fragmented regulatory framework, which may impede the development of the digital economy.
In this regard, a comprehensive solution to address these concerns is essential in ensuring an inclusive digital transformation for the country, thus harnessing the potential of the digital economy to achieve a sustainable nation.

Food Security The agro-food subsector remains pivotal in ensuring food security to support domestic consumption.

Despite the strides made in producing food, Malaysia is still relying on imports to meet domestic needs.
For instance, domestic rice production declined by 6.6% in 2022, with a concurrent increase in the imports of rice by 4.8%.

This situation was exacerbated by a decrease in the self- sufficiency ratio (SSR) of rice to 62.6% in 2022 (2021: 65.2%).

Additionally, the reduction in land designated for agriculture, particularly for paddy cultivation, further aggravated the food security and self-sufficiency challenges.
Climate change, characterised by irregular weather patterns, amplifies the threats to crop yields and livestock production.

To address these multifaceted issues, the measures outlined in MTR of the Twelfth Plan emphasise on the adoption of a comprehensive and timely strategy to address food security.
These strategies also include enhancing agricultural practices, optimising sustainable land use, adopting climate-resilient strategies as well as harnessing technological advancements to secure a stable and self-sufficient food supply for the nation.
Institutional Reforms Transition to Green Economy Malaysia’s transition to a green economy presents a host of intricate challenges due to its heavy reliance on fossil fuels, which exposes the nation to economic vulnerabilities as global demand shifts towards renewable energy sources.

To navigate this transition effectively, it is imperative for the country to diversify its energy sources and invest in sustainable infrastructure, while ensuring a just transition for carbon-intensive industries and MSMEs.
Additionally, as a mega-biodiverse nation bestowed with rich ecosystems, Malaysia faces the critical task of managing its land use effectively and sustainably preserving its natural heritage.

Achieving a green economy in Malaysia requires determined efforts to overcome these formidable hurdles.
Success hinges on a strategic approach that harmonises economic development with environmental stewardship and social inclusivity, necessitating comprehensive policies, greater public awareness, and robust international collaborations in forging a sustainable future for the nation.
17 Chapter 1.indd 17 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 feature article 1.1 Just Transitions for a Sustainable Future Introduction Amid the pressing need globally to combat climate change and its widespread repercussions, the concept of “Just Transitions” has emerged as a key guiding principle for nations to facilitate the move towards a sustainable future.
According to the United Nations, developing countries may require a greater focus on adaptation and resilience-building given higher rates of poverty and informality, greater vulnerability to shocks and greater reliance on agriculture and tourism, and in some cases fossil fuels.

Addressing investment and technology gaps within the constraints of developing countries´ macroeconomic realities will be imperative.
However, achieving a just and effective transition will require an even greater emphasis on social transformation and safety nets.

This emphasis will be enshrined in a framework that leaves and pushes no one behind, and works through and across value chains to uphold human and labour rights.

Furthermore, a greater understanding of the transnational impacts of Just Transition is essential, including the impacts on trade.
This concept underscores the essential interplay surrounding nation building, climate mitigation and adaptation as well as social justice.

In the case of Malaysia, a nation blessed with social unity and wellbeing, ecological diversity and abundance as well as progressive economic and technological advancements, the concept of Just Transitions forge a pathway towards a sustainable future that leaves no one behind.
Overall, the intricacies of Just Transitions emphasises the imperatives of harmonising climate action and social equity guided by its core principles.

The transformative approach will address the impending challenges by reviewing policies and enhancing governance while capitalising emerging opportunities.
Understanding the Need for a Just Transition The climatic events and geopolitical shifts have been forcing nations to respond diversely in order to manage resource availability and avoid falling into a recession.

The threats of global warming continue to increase, thus adversely affecting the world’s climatic systems.
This has led to the world experiencing extreme weather conditions which have contributed towards the increase of natural disaster incidents and severity, health risk, shortage of food and water supply as well as rising inflation.

Global energy usage is increasing exponentially, and so are its prices.

The ongoing Russia-Ukraine conflict continues to disrupt the flow of basic resources and supply chains globally.
Human migration is increasing as many have to flee from the said challenges in search of a better living.

In addition, the world is still recovering from the recent global pandemic, with many still on alert.

Thus, energy, water, food and border security continuously become major concerns for nations as they move towards decarbonisation, resilient growth, and sustainable development.
As the world reacts to these challenges, unilateral actions are being undertaken, translating into increasing economic pressures globally.

The European Union (EU) has just implemented new trade regulations, the Carbon Border Adjustment Mechanism (CBAM) and EU Deforestation- free Regulation (EUDR), which will affect many products and businesses coming into the EU.
18 Chapter 1.indd 18 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 Other countries are also looking into introducing similar regulations which further highlight the need for readiness by Malaysian industries to prepare for climate transition.

Many multinational corporations’ headquarters are bound by the home-country environmental, social and governance (ESG) laws and regulations, obligating compliance across the entire value chain.
International investors are also increasingly looking to support strong ESG portfolios.

Due to these emerging trends, many nations are pushing to promote sustainable and ethical governance in policies and implementations.

Delays in responding to these global developments will see nations be left behind and would incur significant economic costs.
Therefore, an enabling environment is needed to expedite the shift from a fossil fuel-driven economy to one propelled by cleaner energy in a manner that fosters inclusive and enduring economic growth.

Scientific evidence unequivocally attributes the lion’s share of historical responsibility to the developed world.

While each country assumes a role in tackling climate change, developed countries are better equipped to aid global efforts aimed at mitigating climate change and adapting to its ramifications.
Recent economic crises due to the COVID-19 pandemic and geopolitical tensions, accentuate the urgency for developed nations to support their less-developed counterparts in these endeavours.

Such support is crucial in ensuring an equitable transition across countries, a principle stipulated under the Paris Agreement1, which acknowledges the diverse responsibilities and capabilities concerning this shared challenge.
Malaysia’s Perspective: Challenges and Opportunities The impacts of climate change are no longer abstract and are vividly real, particularly for vulnerable communities across the world, including Malaysia.

Rising sea levels, intensified monsoons, and erratic weather patterns disrupt livelihoods and degrade local ecosystems.

In 2022, the nation was hit with severe floods, storms and landslides.

Within this year, we are seeing temperatures soar, and as a result, energy and water use have also increased.
These ramifications disproportionately burden those with limited resources and information access, which could result in socio-economic inequalities.

Consequently, the imperative to address climate change converges with the urgency to ensure that the transition towards sustainability does not exacerbate these disparities.

Although it is vital to transition to a sustainable future, there are economic and social challenges that need to be addressed.
Malaysia’s just transition approach involves maximising the social and economic opportunities of climate action while minimising its impact and delicately managing any challenges.

At its core, this concept champions social justice and wellbeing by ensuring all levels of the rakyat are supported through various policies and actions.
In the effort of decarbonisation, there is a dire need to ensure a just transition for all by integrating the elements of climate mitigation and adaptation as well as resilience management.

As Malaysia aspires to align its development with environmentally responsible practices, it must also account for the potential impacts on employment, communities, technological advancement and economic stability.
1 The Paris Agreement is an international treaty under the UNFCCC adopted in 2015 that aims to combat climate change by limiting global warming to well below 2 degrees Celsius above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5 degrees Celsius while promoting climate resilience and cooperation among nations.
19 Chapter 1.indd 19 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 Equally pivotal are environmental justice and equity, especially in balancing the complexity of reducing environmental impacts with mitigating adverse environmental consequences on society.

The demand for energy, water and food further accentuates the significance of having a just transition.

Vulnerable communities are often the most susceptible to disruptions of these vital resources.
Deliberate planning and collective endeavours are pivotal in building resilience to benefit all segments of society, while ensuring continuous availability of these resources.

Technological advancements and innovations will offer some relief to these challenges.

Clean energy technologies, sustainable agricultural practices, and circular economy ecosystems carve a path towards an economically viable future while mitigating environmental repercussions.
Opportunities for economic expansion and sustainable development are flourishing.

Green jobs, investments in renewable energy, and judicious urban planning hold the potential to usher in economic prosperity while curbing carbon emissions and enhancing societal wellbeing.
Hence, greening the economy will improve the ability to increase energy efficiency and reduce waste as well as manage natural resources sustainably, while generating quality green jobs that will contribute to poverty eradication and social inclusion.

Malaysia’s Just Transition Journey The journey towards a just transition draws strength from both global and local frameworks.

International accords, most notably the Paris Agreement, set the stage for a united climate action.
As a signatory, Malaysia has pledged to curtail carbon emissions and bolster resilience.

These global commitments lay the groundwork upon which national and regional policies, supportive of a just transition, are constructed to undertake the multifaceted approaches in various fields.

As a fast growing, progressive and innovative nation, Malaysia has always been at the forefront of sustainability.
At the national level, the Twelfth Malaysia Plan, 2021 – 2025 (Twelfth Plan) delineates a trajectory towards sustainable development, inclusive growth, and environmental safeguarding.

This comprehensive policy framework incorporates the principles of a just transition by recognising the interdependence of economic, social, and environmental objectives.

Every industry in all sectors across the value chains has a role to play in advancing a just transition.
While a just transition is relevant for all sectors, the approach is unique to local circumstances and business activities.

In realising these endeavours, a collaborative effort involving many different ministries and agencies is pivotal in coordinating and implementing these initiatives.
Malaysia will expedite the assimilation of sustainable practices by fostering collaborations between the federal and state governments including local authorities, as well as between the public and private sectors, with the participation of civil societies.

With Malaysia’s growing economy and population, coupled with increasing temperatures in the region, the energy sector will assume the most pivotal role in ensuring this just transition.
i. Charting Malaysia’s Energy Future The energy sector emerges as the epicenter of transformative shifts.

Energy consumption is vital to economic growth, yet the historical global reliance on fossil fuels has forged the current state of climate change.
The National Energy Policy 2022-2040 (DTN) and National Energy Transition 20 Chapter 1.indd 20 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 Roadmap (NETR) as well as various policies and economic instruments collectively propel Malaysia towards attaining its long-term renewable energy (RE) objectives, primarily through harnessing solar, hydro and biofuels.
These policies will also encourage the usage of rooftop solar and large- scale solar farms, coupled with investments in battery storage systems and the growing hydrogen economy.

In Malaysia’s efforts to ensure the fruits of economic growth are distributed equitably across regions and communities, special attention must be directed towards key industries poised to be adversely affected.
Existing energy sector policies, like the DTN and NETR, highlights measures to sustain the oil and gas sector while reducing reliance on coal.

This energy transitional process necessitates the need to support the sector’s shift towards a lower-carbon growth model while concurrently minimising workforce implications through comprehensive and continuous upskilling and reskilling programmes within the energy industry ecosystem.
However, it needs to be reminded that the impacts will extend beyond the oil and gas sector.

Thus, it is imperative to prepare other industries for the impending low-carbon transition.

ii.

Strengthening Malaysia’s Business Ecosystem As countries worldwide embark on decarbonisation amid a highly interconnected world, international pressures favouring robust climate action are beginning to influence Malaysia’s domestic industries.
The CBAM is an example of a unilateral regulatory instrument that will potentially impact Malaysia’s trade balance by levying a carbon tax on EU-selected imports.

Apart from the EU, several countries are already considering similar regulations, which would impose greater threats to Malaysia’s exports.

Measures must be accelerated to strengthen Malaysia’s industries and businesses to proactively prepare for the CBAM and other similar regulations, such as the EUDR, imposed by trading partners.
These measures are outlined in the New Industrial Masterplan 2030 (NIMP 2030), targeted at advancing local economic complexity, encouraging innovation, enabling supply chain security, embracing technology and digital transformation as well as focusing on sustainable practices and green initiatives.

Adhering to robust ESG principles and facilitating investments in the low-carbon economy will drive industries to curtail their carbon footprint, particularly in carbon-intensive sectors.
This transition encourages job creation conducive to the decarbonisation of diverse industrial activities and supply chains, encompassing mainly energy, transportation, construction, and agriculture sectors.

iii.

Conducive and Green Labour Market Central to the success of a just transition are principles of fair labour policies and practices as well as quality work.

However, sustainability policies and regulations may impose additional burden to the established industries and potentially displace jobs.
As sectors evolve and industries transform, safeguarding the rights and wellbeing of workers becomes paramount.

Integrating the needs of workers and industries into any transition planning will mitigate the uncertainties and facilitate a smoother pathway.

This action encompasses the importance of investing in education, training and skill enhancement opportunities to prepare workers for the growing green industries, hence empowering them to flourish in a dynamic landscape.
These workers would benefit from repurposing current expertise into cleaner energy options like solar or hydrogen, thus ensuring a continuity of their careers and livelihoods.

21 Chapter 1.indd 21 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 iv.
A Robust Carbon Accounting Ecosystem With the emerging pressures of international carbon regulations as well as increasing local disclosure requirements, there is a need to establish a robust and comprehensive carbon accounting ecosystem2 to support domestic industries and businesses.

In both situations, local businesses are required to calculate and report carbon emissions associated with the production process.
This ecosystem provides businesses, regardless of scale, with the tools to evaluate and accurately report their greenhouse gas emissions which will promote greater accountability as businesses champion decarbonisation targets.

The ecosystem requires concerted efforts from both the public and private sectors to boost businesses in this endeavour.
Simultaneously, this exercise amplifies the supply and demand for domestically generated carbon offset and carbon credit activities, channeling additional funds towards low-carbon initiatives, encompassing energy sector decarbonisation as well as investments in nature-based solutions and conservation.

v. The Crucial Role of the Financial Sector The financial sector emerges as a pivotal catalyst in facilitating the transition.
Initiatives spearheaded by Bank Negara Malaysia (BNM), the Securities Commission and Bursa Malaysia has rolled out the Climate Change and Principle-based Taxonomy (CCPT), Sustainable and Responsible Investment (SRI) guidelines and disclosures that mitigate financial risks intertwined with climate change and sustainability.
Concurrently, Malaysia’s role as the leader in Islamic finance will further strengthen the nation’s financing capabilities which amplifies support for sustainability and a just transition, especially through the country’s complete and comprehensive Islamic finance ecosystem, anchored by the strategy to mainstream value-based finance.
The Value-based Intermediation (VBI) initiative, SDG-aligned financing as well as the Value Based Intermediation Financing and Investment Impact Assessment Framework (VBIAF) Sectoral Guides, have been introduced to integrate ESG risk considerations in financing and investment decisions.

This is supported by diverse market players, continuously working towards innovative financial instruments to deploy different forms of capital to support sustainability.
Today, Malaysia’s Islamic financial institutions continue to deliver positive impact to the economy and society via value-based finance for productive purposes such as pioneering green and sustainable sukuk, waqf and musharakah mutanaqisah home financing 3 as well as greening value chain finance programmes to assist SMEs in implementing impactful, long-term changes in greening their operations.
BNM has also deployed blended finance and non-debt funding facilities to improve business saviness and financial resilience of SMEs to elevate their contribution to sustainable economic growth.

Through a greater understanding of Maqasid Shariah, Islamic finance can be fortified to balance between the social and environmental needs with economic development.

2 includes carbon calculators, verifiers, standards and guidelines, auditors, registry, etc.
3 A musyarakah may be entered into by two or more parties on a particular asset or venture which allows one of the partners to gradually acquire the shareholding of the other partner through an agreed redemption method during the tenure of the musyarakah contract.

Such arrangement is commonly referred to as musharakah mutanaqisah (diminishing partnership).

22 Chapter 1.indd 22 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 vi.
Societal Engagement: The All-Inclusive Approach Malaysia’s just transition journey will effectively address climate change through a holistic societal approach, entailing the active involvement of the rakyat.

In turn, the Government through collaborative efforts with relevant stakeholders will ensure the needs of the rakyat are fulfilled amid the transition to low-carbon.
Initiating awareness campaigns about climate change and its repercussions constitute the preliminary stride towards integrating the urgency for action within the public consciousness.

On top of that, strengthening the social safety net with enhanced safeguards for the low- and middle-income categories can mitigate the financial and economic risks associated with climate change and the low-carbon transition.
This will therefore protect these groups from economic shocks and inflationary pressures that may materialise in the future.

The introduction of carbon pricing instruments, complemented by the rationalisation of subsidies will generate funding that will be redirected towards strengthening the nation’s energy, food and water security, hence bolstering Malaysians’ livelihoods.

vii.
vii.

Pioneering a Regional Just Transition With Malaysia’s strong foundation in economic growth, sustainability, Islamic financing and nature- based solutions, Malaysia possesses the potential to play a leadership role within the region as a climate pioneer.

As fellow ASEAN nations embark on their individual low-carbon transitions, collaborative efforts in emissions reduction, renewable energy proliferation, and economic instruments can set the stage for regional climate endeavours.
Further to the development of a standardised ASEAN-level climate taxonomy, the discourse on the establishment of a universally applicable carbon pricing mechanism will also galvanize the region’s climate action efforts while preparing for the coming challenges.

Conclusion Within the realm of climate action and equitable development, in line with the Ekonomi MADANI framework, a just transition approach will guide Malaysia moving forward.
This approach holds the promise of harmonising these issues as the nation grapples with the entwined challenges of achieving a high-income nation status while managing its natural heritage as well as safeguarding the rakyat.

It becomes imperative for individuals, governments, corporations and civil societies to unite in shaping Malaysia’s development trajectory.
The urgency of the climate crisis demands resolute action, and a just transition provides a framework for action that traverses borders and sectors.

It demands a collective commitment from local communities to global platforms, encapsulating a future where social fairness and environmental sustainability intertwine seamlessly.
Guided by the principles of Just Transition and the Ekonomi MADANI framework, Malaysia charts a development trajectory leading to a sustainable future that is comprehensive and environmentally conscious, through the equilibrium between economic growth, climate mitigation and adaptation as well as social justice.

Chapter 1.indd 23 06/10/2023 7:39 PM 23 chapter 1 economic management and prospectseconomic outlook 2024 Good Governance while necessitating a plan for reskilling of the current workforce.
Aligned with the Good governance is crucial to instil confidence Government’s vision to rebuild a dynamic civil and trust among stakeholders, which reflects service, governance standards for leadership effective government administration.

The and decision-making need to be refined.


WCY IMD 2023 report identifies areas that Therefore, providing ample training and require improvement, particularly in enhancing career growth opportunities is imperative for government legislation related to businesses maintaining a competent workforce.

and societal frameworks.

Thus, there is a need to enhance civil society and citizen involvement Wages in policymaking.
In addition, the Principles of Good Governance (PGG) for GLICs provides a Malaysia has seen a significant economic framework that guides baseline governance growth and achieved upper middle-income and sustainability practices.

This guideline economy status over the last 30 years.

represents an initiative aimed at elevating However, the growth has yet to be translated corporate governance, with a particular into equitable income distribution for workers.

emphasis on ESG considerations.


Compensation of employees (CE) has remained Public Service Delivery In ensuring public service delivery is efficient and effective, efforts have been focused on low, reflecting a persistent structure of a low-wage labour market.

Currently, CE hovers around 35% to GDP, compared to 40% targeted by 2025.

The mean wage growth of 4.3%2, only resulted in an average annual increment raising service quality through investments in of RM106 for workers.
This modest increment human capital development and digitalisation.

is not sufficient to support households, The achievement of these objectives demands particularly the low-income earners to achieve a comprehensive approach, which requires a decent standard of living.
The issue of low improved governance, reduced bureaucracy, wages has led to limited local workforce increased transparency, heightened engagement in lower occupation categories, accountability, enhanced capacity building, increasing dependence on low-skilled foreign and a steadfast commitment in meeting the workers and hampering labour productivity.

needs of the rakyat.


In order to gear the Addressing the low-wage concern is crucial transformation process towards digitalisation, for Malaysia to unlock the full potential of its the public sector must be agile and keep human capital and achieve balanced economic abreast to this trend.

This will require a more growth, which will benefit all segments of strategic human capital recruitment process society and promote inclusive development.
2 Refers to wage growth for Malaysian citizens only during the period from 2010 to 2021.

24 Chapter 1.indd 24 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 information box 1.2 Wages as a Source of Growth In collaboration with Khazanah Research Institute (KRI) Introduction As Malaysia aspires to become a high-income nation, various measures have been undertaken to accelerate the shift to high technology and knowledge-intensive economy.
The initiatives have borne fruits as evidenced by the encouraging economic growth trend recorded over the past few decades.

Nonetheless, the absolute benefit of the growth has yet to be translated into fair income distribution, including the need to address the longstanding low labour income issues.
Malaysians are finding it increasingly difficult to cope with the rising costs due to structural wage stagnation, thereby placing an added burden on the Government to provide subsidies and cash transfers to alleviate pressures on the rakyat.

The introduction of the minimum wage in 2013 was a significant progressive step, but more needs to be done if the Ekonomi MADANI framework’s target of raising compensation of employees to 45% of GDP is to be realised.
Distribution of wages in Malaysia – wage growth and inequality from 2010 to 2019 A study by Khazanah Research Institute (KRI) in 2023 on wage growth from 2010 to 2019 produced three key findings.

First, the Malaysian labour market is dependent on policy interventions such as the minimum wage to ensure equitable and inclusive wage growth.

The study also finds that wage growth is suppressed and broadly regressive without policy measures.
Figure 1.2.1 highlights the impact of the minimum wage on low wage earners by comparing wage growth rates across wage deciles between the years in which the minimum wage was introduced or increased (MW periods), FIGURE 1.2.1.
Percentage Change in Real Monthly Individual Wage Growth by Wage Decile, 2010 – 2019 % change 12 10 8 6 4 2 0 Without the MW, wage growth is broadly regressive WAGE DECILE MW NON-MW Source: Khazanah Research Institute and Department of Statistics, Malaysia 25 Chapter 1.indd 25 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 and the years before or without an increase in the minimum wage (non-MW periods).
The analysis indicates that wage growth for the bottom 30% of wage earners was dependent on the minimum wage implementation.

Without the Government’s directive to employers, the wage level would have remained suppressed.

Second, the effects of the minimum wage are limited to the lowest wage earners, with the middle wage earners experiencing the lowest growth during the period, as depicted in Figure 1.2.2.
In ringgit terms, the wage growth of the middle wage earners is even lower than the growth of the lowest 30% wage earner group, as shown in Figure 1.2.3.

FIGURE 1.2.2.

Percentage Change in Real Monthly Individual Wage Growth by Decile, 2010 – 2019 FIGURE 1.2.3.
Absolute (RM) Change in Real Monthly Individual Wage by Decile, 2010 – 2019 % change Progressive 65 60 55 50 45 40 35 30 25 20 ‘Squeezed’ Middle Regressive Change (RM) 300 250 200 150 100 50 0 WAGE DECILE WAGE GROWTH RATE WAGE DECILE MW NON - MW Source: Khazanah Research Institute and Department of Statistics, Malaysia Source: Khazanah Research Institute and Department of Statistics, Malaysia Third, wage stagnation1 is found to be a central feature of the Malaysian labour market despite the effects of minimum wage.
The bottom 50% of workers only experienced an increase of the real monthly wage by approximately RM500 during the 2010 – 2019 period, which translates to a rough increase of RM56 per year, as illustrated in Figure 1.2.4.

These findings provide a basis to comprehend the vulnerability of Malaysian households when confronted with the rising costs, as their wage increments have arguably been insufficient to provide a buffer against future shocks.
1 The definition of wage stagnation varies by context but is most commonly defined as a situation whereby wage growth is slower or barely keeping pace with the rate of inflation or cost of living.

26 Chapter 1.indd 26 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 FIGURE 1.2.4.
Absolute (RM) Change in Real Monthly Individual Wage by Decile, 2010 – 2019 Change (RM) 2,500 2,000 1,500 1,000 500 0 Annual real wage increases of only ~RM56 for the bottom 50% REAL WAGE WAGE DECILE Source: Khazanah Research Institute and Department of Statistics, Malaysia Low starting salaries among graduates An individual’s starting wage plays an important role in determining their overall wage trajectory (Guvenen et.
al., 2019), and fresh graduates in Malaysia faced stagnant wage outcomes over the past decade (Rahim, M.A.R.A.

and Suhaimi, S.A., 2022).

Over 70% of working graduates earned below RM2,000 per month, and concerningly, the percentage of those earning between RM1,000 and RM2,000 has increased from 43.7% in 2010 to 54.6% in 2020, as depicted in Figure 1.2.5.
Similarly, between 2019 and 2020, there was a decline in graduates earning above RM2,000 by 2.3%, while those earning below the minimum wage grew from 48.8% to 51.1%, as shown in Table 1.2.1.

The scenario suggests that majority of tertiary-educated graduates entered the job market at below the living wage2 as stipulated by Belanjawanku 2022/2023.

With a relatively lower starting wage, the graduates could consequently suffer low increments and may take a longer time to reach a sufficient level.
The labour market’s inability to pay the fresh graduates adequately, is nested within a larger structural challenge of job creation.

The employment share of labour-intensive traditional services, such as wholesale and retail trade; accommodation, food and beverages; as well as administrative and support service activities, has grown over the past two decades (Tumin, S.A., 2021; Rahman, A.A. and Schmillen, 2020).
The concentration of new jobs in these sectors has resulted in elevated skills-related underemployment3 rates among graduates, whereby the rate has increased from 24.5% in 2017 to 33.9% in 2021 (DOSM, 2022a).

2 The Belanjawanku 2022/2023 report by Employees Provident Fund (EPF) estimated at RM2,600 for a single adult car owner residing in Klang Valley in 2022 – 2023.

3 Skills-related underemployment is defined as those with tertiary education but working in semi-skilled or low-skilled occupations.
27 Chapter 1.indd 27 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 FIGURE 1.2.5.

Percentage of Working Graduates by Monthly Income Range, 2010 - 2020 table 1.2.1.
Percentage of Working graduates by Monthly Income, 2019-2020 % of working graduates 100 43.7 28.7 80 60 40 20 0 income ranGe 2019 2020 Less than RM1,500 RM1,500 - RM2,000 More than RM2,000 48.8 20.0 31.2 51.1 20.0 28.9 Total 100.0 100.0 Source: Khazanah Research Institute and Ministry of Higher Education, Malaysia 54.6 16. > RM5000 RM3001 - RM5000 RM2001 - RM3000 RM1001 - RM2000 < RM1000 Source: Khazanah Research Institute and Ministry of Higher Education, Malaysia Consequences of low wages While structural challenges are a source of the wage conundrum, dismal wage levels are themselves at the root of trends that feed back into Malaysia’s structural problems.
Two prominent trends that are linked to the lack of well-paying employment are brain drain and the increasing levels of non-standard employment such as gig work.

Brain drain, though not rare from a global perspective, severely inhibits the economic and social potential of developing countries (Gibson and McKenzie, 2010).

Based on a study by the World Bank in 2010, about 54% of Malaysia’s brain drain, were in Singapore.
Meanwhile, a report by the Institute for Labour Market Information and Analysis (ILMIA), Ministry of Human Resources (MOHR) in 2019 reported that Malaysians who work in Singapore consist of two groups; those who live in Malaysia but work in Singapore (commuters) and those who live and work in Singapore (residents).

Among the commuters, 58% of them worked in semi- skilled occupations and 10% in low-skilled occupations.
On the other hand, 58% of the residents were typically tertiary-educated and primarily worked in skilled occupations which are managers, professionals, and associate technicians.

Higher salary is the predominant motivator in pulling Malaysians to work in Singapore.

Findings from interview sessions conducted by ILMIA highlight that Malaysians were offered higher salaries and compensation for the same job.
Meanwhile, the MEF Salary Survey for 2022 shows that a manager in the manufacturing industry receive a basic monthly salary of RM10,304, while a similar role in Singapore offers SGD7,532, which is equivalent to RM24,6954.

Likewise, a clerk in the administration and support services would earn a monthly wage of RM2,065 as compared to 4 Referring to exchange rate of SGD1 = RM3.2787 as of 29 December 2022.
28 Chapter 1.indd 28 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 SGD2,000 in Singapore, while the accommodation and food and beverages subsector paying nearly five times more in Singapore (Malaysian Employers Federation, 2023; Ministry of Manpower, 2023; DOSM, 2022b).

The wage discrepancies between Malaysia and Singapore is applicable to a wide range of occupations and industries.
On another aspect, Malaysians working in Singapore had been able to save a sizable share of their earnings with 51.1% of commuters managed to save around 1% - 10% of their monthly salaries, while nearly 60% of residents have been saving more than 10% (Figure 1.2.6).

Meanwhile in Malaysia, Bank Negara Malaysia in 2023 reported that only 36% of Malaysian households would be able to sustain expenses for the next three to six months in the event of a loss of income.
As a rule of thumb, Belanjawanku report has suggested the use of a 45/35/20 rule whereby 45% of an individual’s budget should be allocated for necessities, 35% to commitments and 20% to savings.

Stagnant wages make it increasingly difficult for individuals and households to save and cope with rising costs.

FIGURE 1.2.6.
Percentage of Savings of Monthly Wage by Residents and Commuters, 2018 % of respondents 100 80 60 40 20 0 35.0 51.1 5.8 10.2 27.6 22.4 16.1 7.7 15.5 8.6 No savings 0% 1%-10% 11%-20% 21%-30% More than 30% RESIDE COMMUTE % OF SAVINGS OF MONTHLY WAGE Source: Institute of Labour Market Information and Analysis and Ministry of Human Resources, Malaysia Another consequence of the wage issue is the increasing number of SPM leavers opting for gig work such as p-hailing or e-hailing5 services, instead of continuing their education or developing core skills and capabilities in a career track.
An estimated 26% of employed persons were involved in gig work in 2020 (Azahar, S., 2020), and preliminary estimates indicate that the gig sector can provide a monthly income that is competitive compared to the starting salaries of fresh graduates (Goh and Omar, 2019).

Other contributing factors include the unavailability of job opportunities as well as the belief that furthering their studies does not guarantee quality jobs (Mutalib, H., 2022).
However, the precarious nature of gig work poses a significant risk in the long term.

The lack of regulatory oversight in ensuring decent work standards, and difficulties in extending social assistance to gig workers renders many of them ‘invisible’ and remain outside the formal system (Hamid, H.A.

and Sazali, N.T., 2020).


Furthermore, the expansion of gig work may not yield favourable returns to the economy if it translates to an increasing share of the workforce foregoing long-term investments in skills and capabilities.

5 P-hailing refers to food, drink, and parcel delivery by motorcycle.

E-hailing is defined as a transport service offered by private vehicles through an online application.
29 Chapter 1.indd 29 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 Positive spillovers from higher wages The issue of low wages in Malaysia is normally linked to the economy’s productivity challenges, with the implied argument that employers should wait for productivity to rise before increasing the wages.

This approach ignores the fact that providing higher wages is part of the solution to productivity challenge.
If Malaysia aims to escape the low-wage, low-profit, and low-productivity trap, a cheap labour model of business and economic growth must be counteracted through a concerted effort to raise wages.

Rising wages have been part of the economic and industrial transitions of Asia’s highly advanced economies (Wade, 2004) and nations need to embrace a vision of wage growth as being a source, rather than just a consequence, of economic growth.
According to a study by KRI in 2019 on the consumption patterns of Malaysian households, it is found that only the top 30% of households demonstrated spending patterns that were reflective of “middle-class6” aspirations, which is an indication that raising the wages of Malaysia’s low- and middle-income earners holds the potential to increase the size of the domestic market and benefit local businesses.
In 2022, The Centre for Future Labour Market Studies (EU-ERA) modelled the effects of higher wages on Malaysia’s domestic economy through a Computable General Equilibrium7 model and found that wage growth could have positive effects on other macroeconomic indicators as illustrated in Table 1.2.2. table 1.2.2.
EU-ERA’s Simulation of the Economic Impact of Higher Wages 3% +5.6% +4.2% -2.2% 4% +6.0% +4.8% -2.4% 5% +6.5% +5.4% -2.5% increaSe in total WaGe GDP (current price) Labour productivity Income inequality (Gini index) Source: The Centre for Future Labour Market Studies (EU-ERA) and Ministry of Finance, Malaysia Conclusion Policy interventions are required to improve wage outcomes.
Evidence-based analysis has indicated that the minimum wage is a crucial intervention in the labour market to raise wages of the low- income workers and reduce wage inequality.

The primary lesson of the minimum wage is that progressive, consultative and decisive measures are required to improve the equitability and inclusiveness of the economy.

Therefore, the focus of current policy efforts needs to ensure significant improvements in the median wage level in the coming years.
If the minimum wage is effective in raising wages at the lower end of the distribution, then additional measures should be targeted towards the middle wage earners.

Such effort will require close collaboration between the Government, employers and labour unions to ensure sustainability and effectiveness.

The Ekonomi MADANI framework stresses the need for a whole-of-nation approach with a focus on empowering the rakyat in the hopes of ‘Building a Better Malaysia Together’.
Therefore, employers and businesses, in particular, need to embrace wage growth as a source of business and economic transformation.

6 Middle-class is defined as households that are able to maintain or invest further in their upward mobility as well as protect themselves from risky scenarios.

7 Simulation results are derived based on CGE model.

It produces a projection of economic, sosial and environmental indicators up to 2030.
The model assumes that increases in wage rates induce additional consumption by households, therefore resulting in additional output and profit for firms.

30 Chapter 1.indd 30 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 Combatting Inequality Cost of Living The Government is dedicated to alleviate the burdens of the rakyat, particularly the vulnerable groups amid rising cost of living.
According to the Asian Development Bank, the surge in the cost is forcing a significant portion of the population into economic hardship, necessitating concerted efforts to enable the less fortunate to survive in the environment of elevated prices and economic uncertainties.

The cost of living significantly impacts the affordability of Malaysian households, especially those in the urban areas, as many have tight financial commitments including loans.
Addressing this issue is essential in ensuring financial stability and a decent quality of life for the rakyat.

Balanced Regional Development Balancing regional development is essential for Malaysia to achieve equitable growth across states and regions.

Despite of the Government's efforts in the past, disparities continued to persist, evidenced by regional inequalities, low urban resilience, obstacles to rural development, and underutilisation of opportunities in sub-regional cooperation.
Such imbalances lead to issues including rural-urban migration, increased living costs, income inequality, and urban poverty.

To achieve a balanced regional development, a comprehensive strategy is needed, encompassing targeted investments in underdeveloped regions, improved connectivity, support for local industries, and the creation of employment opportunities.
Social Protection System The presence of various government agencies that look into social protection and the absence of an overarching policy have hampered coordination efficiency.

The situation is further aggravated by the differing objectives and monitoring methods used by these agencies, resulting in fragmentation and overlapping of programmes as well as higher implementation costs.
Furthermore, numerous databases hinder data integration and system interoperability, thereby undermining effective targeting mechanisms.

These problems have led to inclusion and exclusion errors, causing resource leakages and reducing assistance efficiency and coverage.

In this respect, the COVID-19 pandemic has inadvertently pushed the need for a comprehensive social protection system without undermining fiscal sustainability.
The establishment of the system, along with the harmonisation of the objectives and mechanisms among the responsible agencies will enhance efficiency, reduce costs, as well as provide better coverage and support for those in need.

Quality Infrastructure Quality infrastructure provides the foundation for economic activities, essentially by increasing connectivity and accessibility of amenities and services to the rakyat.
While a majority of the rakyat enjoy convenient access to basic amenities such as clean water, electricity, internet connectivity, and transportation networks, disparities persist due to varying development levels across the country.

For instance, while most states have access to clean water, yet certain states such as Kelantan, Sabah, and Sarawak still require more coverage.
Therefore, bridging these accessibility gaps is essential to ensure equitable development and enhance the quality of life for all Malaysians.

Meanwhile, investing in high-quality infrastructure, particularly public transportation system can stimulate economic activities and attract investors to create job opportunities, while delivering improved public services.
31 Chapter 1.indd 31 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 Strategic Initiatives – Budget 2024 complexity, digitalisation, green growth and inclusive growth across the nation.

Initiatives will also be undertaken to strengthen Malaysia as an internationally competitive investment Ekonomi MADANI serves as the foundational destination and to enhance ease of doing framework towards building a better Malaysia business.
Greater empowerment of SMEs together by re-establishing Malaysia as a will be emphasised through facilitating SME leading economy in Asia and ensure a high financing, competitiveness, human capital quality and just life for the rakyat.

The upskilling and export orientation.


Malaysia ambitions of Ekonomi MADANI have been will also aim to energise innovation in Islamic subsequently reflected and elaborated in policy economy, particularly in Islamic Finance and documents, namely the NETR, NIMP 2030 and halal products.

In addition, the transformation MTR of the Twelfth Plan.
Likewise, the Budget of the economy will need to be supported 2024 is geared towards articulating immediate by greater efforts to strengthening economic initiatives and reforms for implementation sustainability and security, particularly in food in 2024, as initial steps towards realising the and energy.

aspirations of Ekonomi MADANI.


In line with Ekonomi MADANI, the Budget “raise the floor”, the Budget 2024 sets out 2024 has three focus areas, namely delivering initiatives to elevate the rakyat’s quality of life reforms to enhance governance and public in concomitance with “raising the ceiling” of delivery system; transforming the economy Malaysia’s economic potential.
A higher quality and businesses, in addition to elevating the of life encompasses the creation of meaningful Encapsulating Ekonomi MADANI’s aims to wellbeing of the rakyat.

jobs with decent wages, inclusivity and equal opportunity, universal access to education and Looking ahead towards 2024, Malaysia faces healthcare, world-class basic utilities, and a the challenge of both a less robust global more comprehensive social safety net for all economic outlook combined with Malaysia’s Malaysians.
This includes ensuring the lower fiscal constraints.

Beginning 2024, fiscal income groups continue to be assisted with reforms are necessary to provide the fiscal the challenges of cost of living, in conjunction room to support economic growth and with the transition towards targeted subsidies.

restructuring while also attending to the needs of the rakyat.
Towards this, the Government This holistic restructuring of Malaysia’s has committed to the FRA, continues its economy as envisioned in the Ekonomi commitment to gradually reduce the fiscal MADANI framework requires a whole-of- deficit and rationalise subsidies to be more targeted.

Institutional reform will also be nation approach.


The Government’s approach will aspire to build greater partnerships undertaken towards greater governance and with the industries and the rakyat towards enhancing the effectiveness of public delivery realising Ekonomi MADANI.

At the same time, and implementation of Government initiatives.

collaborations will also be forged with state governments and NGOs to meet national The transformation of the economy envisioned development needs.
under the Budget 2024 aims to initiate reforms to kickstart the implementation of The Budget 2024 therefore marks the start the NETR, NIMP 2030 and MTR of the Twelfth of Malaysia’s journey to rebuild a sustainable, Plan.

Towards this, incentives and funding inclusive, and buoyant economy as envisioned will be provided to promote greater economic in the Ekonomi MADANI framework.
32 Chapter 1.indd 32 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 information box 1.3 Mid-Term Review of the Twelfth Malaysia Plan In collaboration with the Ministry of Economy Introduction The Twelfth Malaysia Plan, 2021 – 2025 (the Twelfth Plan), is a medium-term plan with the objective of achieving ‘A Prosperous, Inclusive, Sustainable Malaysia’.
Since its implementation, Malaysia has registered commendable socioeconomic development, particularly in spurring economic recovery post-pandemic COVID-19 despite experiencing several global and domestic challenges.

Nevertheless, continuous effort needs to be intensified to ensure the targeted outcomes of the Twelfth Plan are achieved.

Thus, a review of targets, policies and strategies of the Twelfth Plan is imperative in ensuring Malaysia remains on the right growth trajectory.
The Mid-Term Review of the Twelfth Malaysia Plan (MTR of the Twelfth Plan) encompasses revised policies and strategies in line with the ‘Ekonomi MADANI: Memperkasa Rakyat’ (Ekonomi MADANI) framework to regain honour and dignity of the rakyat as well as transform Malaysia into a prosperous and high-income nation.
Under the theme ‘Sustainable, Prosperous and High-income Nation’, the MTR of the Twelfth Plan introduces a total of 17 Big Bolds as strategic initiatives that serve as the main catalysts in accelerating efforts to reform the socioeconomic development in line with the Malaysia MADANI aspiration.

The MTR of the Twelfth Plan is set to be the foundational document to steer and elevate the nation’s development status as well as empower the rakyat.
Progress of the Twelfth Malaysia Plan Various measures have been implemented to propel Malaysia towards a more robust growth trajectory, yielding achievements across various key indicators.
Among notable accomplishments include a 4.2% increase in GDP during the first half of 2023; a commendable labour market productivity growth of 3.7% annually during 2021 and 2022; a reduction in the unemployment rate to 3.5% in Q2 2023; and a decline in the inflation rate to 2% in August 2023, the lowest since September 2021.

Furthermore, the gross national income (GNI) per capita rose significantly, reaching RM52,968 (USD12,035) in 2022 compared with RM42,838 (USD10,191) in 2020.
Malaysia also ranked favourably in Human Development Index (HDI) 2022, standing at 62 out of 191 countries, while the Malaysian Well-being Index (MyWI) indicator recorded an annual increase of 1.3% in 2021.

Additionally, the average monthly household income saw an encouraging improvement, reaching RM8,479 in 2022 from RM7,901 in 2019.

These achievements demonstrate positive economic growth and development trends in Malaysia.
Framework of The Mid-Term Review The central tenets of Malaysia MADANI’s aspiration, coupled with the strategic framework of Ekonomi MADANI serve as the foundational pillars of the MTR of the Twelfth Plan that would eventually lead to a better quality of life for the rakyat.
The overarching theme of the MTR of the Twelfth Plan is underpinned by the key enabler, which is enhancing efficiency of public service delivery with three main focus areas, namely strengthening sustainability, building a prosperous society and achieving high-income nation.

The 17 Big Bolds will catalyse the socioeconomic development in the remaining period of 2023 – 2025 through a set of main strategies and initiatives1 across the three main focus areas as highlighted in Figure 1.3.1.
1 There are 71 key strategies and initiatives discussed in the main document of the MTR of the Twelfth Plan.

33 Chapter 1.indd 33 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 chapter 1 ECONOMIC MANAGEMENT AND PROSPECTS FIGURE 1.3.1.
Framework of the Mid-Term Review of the Twelfth Malaysia Plan Under the new framework, 17 ‘Big Bolds’ have been outlined to catalyse development across the key enabler and 3 focus areas moving forward Aspiration Ekonomi MADANI: Memperkasa Rakyat Theme Sustainable, Prosperous, High-Income Nation Key enabler Enhancing efficiency of public service delivery 1.

Governance and institutional framework 1 2.

Legislation related to corruption 2 1 2 3 Focus areas Strengthening sustainability 1.
Fiscal sustainability 3 and financial systems 2.

HGHV Industry based 4 on energy transition 3.

Targeted subsidies 5 Building prosperous society 1.

Encultration of 6 MADANI society 2.

Social protection 7 reforms 3.

Housing for the rakyat 8 4.

Strengthening 9 healthcare services 5.

Strengthening national 10 security and defence Achieving high- income nation 1.

Digital and technology 11 11 based HGHV industries 2.

High value E&E HGHV 12 12 industry 3.

Agriculture and 13 13 Agro-based HGHV industry 4.


Rare earth HGHV 14 industry 15 5.

Empowering MSMEs and social enterprises 6.

Streamlining the public 16 transport network 7.

Future-ready talent 17 Source: Ministry of Economy, Malaysia Way Forward Macroeconomic Prospect Looking ahead to the remaining period of the Twelfth Plan, the economy is poised to grow ranging from 5% to 5.5% annually, driven primarily by domestic demand, with a notable contribution from private sector spending.
In addition, there will be concentrated efforts to enhance labour productivity that is projected to increase by 3.8% annually.

This anticipated improvement in the labour market is instrumental in achieving the targeted share of compensation of employees (CE) set at 40% of GDP by 2025.

Furthermore, the GNI per capita is anticipated to reach RM61,000 (USD14,250) by 2025 while inflation rates are expected to remain within the range of 2.8% to 3.8%.
On the supply side of the economy, the services and manufacturing sectors will continue to serve as the principal sources of growth.

Additionally, it is anticipated that robust growth in the civil engineering and residential building subsectors will play a pivotal role in supporting the recovery of the construction sector for the remaining period of the Twelfth Plan.
Enhancing Efficiency of Public Service Delivery The Government will focus on enhancing value-based governance by improving accountability and transparency as well as strengthening and acculturating integrity in public service.

These strategies will be supported by two Big Bolds, namely Governance and Institutional Framework as well as Legislation related to Corruption.
Digital transformation will be further accelerated by improving end-to-end online services and boosting data sharing arrangements, in line with the whole-of-nation approach.

The modernisation of the public service will be continued through the Government Technology (GovTech) initiative.
In 34 economic outlooK 2024 Chapter 1.indd 34 06/10/2023 7:39 PM addition, Pangkalan Data Utama (PADU) will be developed as a data repository to support accurate and transparent distribution of targeted subsidies and assistances in addressing socioeconomic issues at individual household level, under the Big Bold Targeted Subsidies.

Institutional and business framework will continue to be strengthened by reviewing structure and function of ministries and agencies as well as enhancing ease of doing business.
Further to this, the Government will prioritise on improving the effectiveness and efficiency of budget and project management for better service delivery through the Big Bold Fiscal Sustainability and Financial System.

Main Focus Areas Three main focus areas outlined in the MTR of the Twelfth Plan are strengthening sustainability, building a prosperous society and achieving high-income nation.
Strengthening Sustainability The MTR of the Twelfth Plan maintains a steadfast focus on bolstering sustainability through several key objectives encompassing the promotion of economic growth; the enhancement of fiscal sustainability; and the acceleration of the transition towards an economy that is resilient and future-ready.
In accelerating the effort to drive economic growth, focus will be given on five high-potential sectors, namely renewable energy; technology and digital; E&E; agriculture and agro-based as well as rare earth industries.

Furthermore, fiscal sustainability will be strengthened by reinforcing fiscal governance, broadening the revenue base, recalibrating subsidies, improving budget management, and enhancing the management of debt and liabilities.
In advancing sustainability, energy transition has become a significant avenue for Malaysia to unlock the green growth potential.

This transition includes a transformation towards a high growth high value (HGHV) industry, with a particular emphasis on Energy Transition as one of the prominent initiatives to address the challenges of climate change and other environmental challenges.
Furthermore, an efficient natural resource management will be further optimised with a priority on conserving natural ecosystems and strengthening water management practices to prevent the exploitation and loss of resources, thus ensuring maximum returns to the economy.

Additionally, there will be a concentrated drive to expedite the implementation of SDGs and encourage the adoption of ESG practices.
This will comprise policies and regulatory frameworks as well as support services to encourage businesses to adopt sustainable business practices.

Building a Prosperous Society The efforts to build an inclusive and more resilient society will continue to be pursued during the remaining period of the Twelfth Plan.

Meanwhile, in addressing and preventing poverty, efforts will be intensified towards increasing income and improving standard of living.
The Government is determined to narrow the income disparity while addressing the regional development imbalance.

Big Bold Social Protection Reform aims to improve efficiency and effectiveness in assisting the poor and vulnerable.

This reform, which is currently being studied will be implemented holistically at the Federal and state levels.
The MTR of the Twelfth Plan also outlines strategies in maintaining peace and stability that include safeguarding national sovereignty as well as intensifying efforts in crime prevention and rehabilitation.

These strategies will be supported through the implementation of the Big Bold Strengthening National Security and Defence.
35 Chapter 1.indd 35 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 Moreover, another Big Bold is on Strengthening Healthcare Services that will be implemented to enhance the wellbeing of the rakyat.

Leasing of medical equipment will be introduced as a measure to ensure availability of the best state-of-the-art medical equipment to the rakyat.

In addition to this, increasing the supply of and improving access to quality and affordable housing will be emphasised.
Big Bold Housing for the Rakyat will be implemented by shifting the focus from ownership to shelter.

Achieving High-income Nation A comprehensive set of measures will be implemented to fortify Malaysia’s economic resilience towards attaining a high-income nation status.
These measures will focus on bolstering the resilience of sectoral and strategic industries; enhancing competitiveness to foster sustainable growth; optimising the effectiveness of financial support mechanisms; and formulating strategic plans for industrial estates and food production areas.
Additionally, steps will be taken to reduce barriers that hinder the scalability of micro, small and medium enterprises (MSMEs) by integrating them into domestic and global supply chains and fostering accelerated productivity growth among MSMEs.

Furthermore, the growth of Digital- and Technology-Based HGHV Industries will be prioritised, supported by the formulation of digitally inclusive policies and the development of a conducive infrastructure.
Similar emphasis will also be placed on building resilient transport and logistics infrastructure.

Moreover, a holistic development approach for the non-radioactive rare earth industry will be implemented, aligning it with the Big Bold Rare Earths HGHV Industry initiative, to maximise the industry’s economic contribution.
Concurrently, initiatives will be enhanced to promote technology adoption, digitalisation, talent acquisition, value chain augmentation, and governance enhancement, all geared towards driving competitiveness and ensuring sustainable growth.

As a strategy to expedite economic growth, several key enablers such as talent development, technology, research, development, commercialisation and innovation (R&D&C&I), digitalisation, and transport and logistics infrastructure will be fortified.
Within this strategy, a progressive wage model will be introduced to stimulate wage growth and address the issue of CE as a share of GDP.

An action plan will also be devised to ensure that the percentage of foreign workers does not exceed 15% of the total workforce.

Ultimately, in ensuring a more holistic development, there will be concentrated efforts to promote regional balance and inclusivity.
These efforts will include initiatives aimed at enhancing regional economic potential, accelerating sustainable urban and rural development, and optimising opportunities arising from subregional cooperation.

Conclusion The MTR of the Twelfth Plan highlights the progress for 2021 – 2022, outlines issues and challenges that need to be addressed as well as paves the way for 2023 – 2025 towards a sustainable, prosperous and high-income nation.
During the review period, economic growth was commendable amid the challenging environment.

The implementation of all development initiatives needs to be accelerated in ensuring domestic and global challenges are managed effectively.

The successful implementation of the 17 Big Bolds is imperative in driving the efforts towards attaining the set targets, in line with the ‘Ekonomi MADANI: Memperkasa Rakyat’ framework.
36 Chapter 1.indd 36 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 Focus 1: Restructuring the Economy to Boost Growth foster prosperity through sustainable economic growth to position the country towards a thriving future globally.

The Budget 2024 builds the foundation for a sustainable development agenda that aligns with the NETR, NIMP 2030, and MTR of the Twelfth Plan, as guided by the Ekonomi MADANI framework.
These policies, specifically the NIMP 2030, will support the Government’s efforts to reform the industries by nurturing higher economic complexity and aggressively embracing technological innovation and product sophistication.

In this regard, focus will be given to HGHV industries and several sectors such as aerospace, E&E, chemicals, pharmaceuticals, and clean energy to propel Malaysia towards technological advancements and competitiveness.
A favourable business environment is imperative to foster a more interconnected and vibrant domestic economy.

These will be achieved by leveraging robust infrastructure, a large talent pool, abundant natural resources, as well as vast technological adoption, digitalisation and innovation.

Acknowledging the contributions of MSMEs to the economy, a diverse array of programmes and projects is poised for implementation to bolster the competitiveness.
However, limited access to financing and shortage of skilled workers persist as major impediments to business expansion.

Thus, the Government remains committed to offer financing facilities and talent development programmes, which will be key components of the Budget 2024.
As Malaysia aims to rank among the top 30 economies in the world within the next decade, the nation must possess the traits of advanced and high-income economies that are characterised by innovation-led and knowledge- intensive economic activities, advanced technology, robust infrastructure, and skilled workforce.
By prioritising these strategic imperatives, Malaysia is poised to boost its competitiveness, amplify productivity, and Harnessing its strategic positioning in the dynamic Southeast Asian region, Malaysia maintains a steadfast commitment and stands ready to benefit from the expanding trade prospects within ASEAN to emerge as the key regional industrial hub.

Therefore, the Government remains committed to boost both DDI and FDI to uphold Malaysia’s status as the preferred investment destination.
The strategy includes streamlining the investment promotion agencies, simplifying administrative procedures, and revising relevant laws and regulations to create a more investor-friendly environment.

Additionally, the Government will formulate and refine industrial and investment policies tailored to regional needs and developmental stages in reducing development gaps and economic disparities.
Special attention will be given to attract investments in emerging sectors such as E&E, digital economy, and aerospace, with GLICs and GLCs driving the development of local vendors and DDI.

In addition, the implementation of outcome-driven tax incentives will catalyse businesses towards impactful ventures and generate high-income employment opportunities.
The Government has also embarked on several measures to promote Malaysia as the preferred investment destination, which include the establishment of special financial zones in Johor and the Klang Valley to attract global investors and knowledge workers.

This effort encompasses the upgrading of existing industrial infrastructure to adopt eco-friendly practices while simultaneously intensifying human capital development to meet investors’ demand.
Collectively, this comprehensive ecosystem sets a solid benchmark to boost investor confidence, which in turn, will propel sustainable growth and solidify Malaysia’s position as a key player in the regional and global economy.
37 Chapter 1.indd 37 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 Smart Industry, often referred to as Malaysia takes pride in its leading role among Industry4WRD, is reshaping the landscape Asian economies in the pursuit of green of manufacturing, distribution, and product growth and climate resilience.

Remarkable innovation.


The combination of digitalisation advancements were made in the adoption of and mechanisation within smart industries sustainable practices across various sectors, holds immense potential and bodes well encompassing substantial investments in with the nation’s vision of ascending to a renewable energy, the implementation high-income and knowledge-driven economy.
of energy-efficient measures, extensive Various initiatives are in place to expedite reforestation initiatives, and the promotion of digital adoption and automation.

The eco-friendly urban planning.


The Government Government continues to support policies is also committed in advancing the that promote manufacturing transformation, commercialisation of green hydrogen, in view advance economic complexity and of its potential as a competitive clean energy technological adoption, as well as prioritise solution for Malaysia which aligns with the economic security and inclusivity to ensure a net-zero aspirations.
In line with the long-term digitally vibrant and sustainable nation.

These commitment to environmental sustainability, strategic endeavours are poised to propel the Budget 2024 will continue to encourage Malaysia forward, bolstering the nation’s businesses to embrace ESG principles, aiming competitiveness on the global stage while at increasing the competitiveness to meet preserving our commitment to sustainability the global standards.

These initiatives entail and inclusivity.


the establishment of pertinent policies and regulatory frameworks, as well as substantial In line with the commitment to technological funding directed towards promoting green advancement and innovation, the Government growth and low-carbon transition.
In addition, will cultivate a conducive and enabling the provision of relevant data and reports is environment aimed at encouraging industries crucial in assessing and accounting the carbon to adopt cutting-edge technologies and emission level in accordance with international innovative business models.

This encompasses best practices.


These concerted green efforts a multifaceted approach, which promotes underscore the determination to champion investment in R&D, enhances digital sustainability agenda, positioning Malaysia as infrastructure, and streamlines cyber the frontier among the developing countries.

security laws to ensure the security of smart industries.
Moreover, educational and training As aspired by the Ekonomi MADANI framework, programmes will be transformed to equip efforts will be directed towards asserting the workforce with the necessary digital skills Malaysia’s position as the leader in driving and provide robust support mechanisms for businesses, particularly the SMEs.

Likewise, innovations for the global Islamic economy.
At present, the global halal market is estimated to the regulatory framework will continuously reach a staggering USD7.7 trillion by 2025.

This be reviewed to stay abreast with the rapid creates a golden opportunity for Malaysia to technological changes, while fostering secure a more substantial share of the global collaboration among regulators, research halal market by enhancing the competitiveness institutions and industry players to stimulate of domestic halal industry.
The strategy seamless integration of new technologies encompasses a comprehensive array of across jurisdictions.

halalan toyyiban activities and Islamic financial 38 Chapter 1.indd 38 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 innovation, pursuant to the Maqasid Shariah principles.
Thus, emphasis will be placed on streamlining the halal certification process, providing financial support mechanisms to boost innovation and productivity, and intensifying marketing strategies to penetrate both local and international markets.

As Malaysia enjoys a mature Islamic finance ecosystem with dynamic players, innovative Shariah-compliant products and comprehensive enabling environment, efforts will be geared towards utilising the value-based finance to support the halal industry.
This strategic cluster will not only bolster Malaysia’s global leadership in Islamic finance and halal industries, but also reinforce its prominence of the halal ecosystem.

Optimal land use is central in safeguarding food security in Malaysia, which will influence production levels that contribute towards the sustainability of food supply.

Given the significant impact of food prices amid the rising cost of living, the Government is committed to promote a higher SSR across a broader spectrum of food items.
The initiatives include optimising the use of existing plantations, expanding food crop areas, and diversifying land use by repurposing idle land into productive farmland for food crops.

Furthermore, the Government aims to bolster the resilience of the agro-food sector through the adoption of agricultural technology, with a specific focus on enhancing smallholder productivity.
Thus, the Government will continue to provide financial support in incentivising farmers and investors to engage in food crop cultivation and adopting modern agricultural technology applications.

These measures will reduce Malaysia’s dependence on food imports and minimise reliance on migrant labour, bolstering self-reliance and reinforcing food security for the nation.
Focus 2: Raising the Rakyat’s Standard of Living through Social Justice In improving the wellbeing of the rakyat, the Government remains steadfast in its commitment to fortify and target social assistance programmes, particularly for the vulnerable groups.

This entails enhancing existing initiatives such as cash transfers, in- kind assistance, subsidies as well as income protection and retirement programmes.
Furthermore, social insurance programmes will undergo enhancements to expand coverage, guaranteeing that Malaysians accumulate sufficient retirement savings.

Efforts will also be continued to strengthen labour market interventions through retraining programmes, hence safeguarding employment prospects for workers amid adverse circumstances.
The overarching goal is to maintain an inclusive and equitable social protection system that shields the rakyat from the burdens of rising living costs and unforeseen hardships.

These measures reflect the Government’s commitment to deliver social protection more efficiently and cohesively, ensuring cost- effectiveness while minimising fragmentation and the likelihood of inclusion and exclusion errors.
Despite the formalisation of many informal sector participants during the COVID-19 pandemic, the Government is committed to enhance the wellbeing of informal sector workers particularly in the context of social insurance and protection.

To achieve this goal, the Government will promote greater coverage of self-employed individuals, including gig workers in the informal sector, contributing to the Self-Employment Social Security Act 2017 [Act 789] and retirement schemes.
This step will ensure these workers have a robust safety net and protection during unforeseen circumstances.
39 Chapter 1.indd 39 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 Additionally, to promote ease of doing teaching and learning delivery system will be business, regulations related to business reformed to ensure learners gain knowledge and licensing approvals will be enhanced to and skills that are aligned with employment encourage and streamline the formal sector needs.
Furthermore, adequate funding will business registrations and employment be provided to ensure continuous access to processes.

This comprehensive approach aims quality education.

Basic education will be to strengthen social security and promote a strengthened to improve child development thriving formal sector for the benefit of all from the early stage.

School facilities and stakeholders.

infrastructure will be upgraded, particularly in dilapidated schools.
Internet connectivity will The Government remains committed to also be improved to facilitate online learning.

provide equal opportunities for all segments Likewise, tertiary programme curriculum of society, irrespective of gender, race, or will be tailored to be more demand-driven income group.

Recognising the importance through strategic collaborations with industry of enhancing skills among specific groups, a players, ensuring graduates are industry-ready.
particular focus will be given to women and Additionally, lifelong learning programmes youth to bolster the employability and income will be enhanced, providing upskilling and prospects.

Measures will be undertaken to retraining initiatives to keep the workforce provide a more conducive working environment up-to-date with the rapidly evolving market to further support women participation in demands, nurturing a highly skilled and economic activities and encourage mothers adaptable workforce.
to return to work.

This includes simplifying registration processes, establishing additional Increasing healthcare quality continues to childcare facilities at workplace, and reinforcing be a priority, focusing on rendering quality flexible working arrangements.

Furthermore, healthcare services.

Hence, facilities and employment rules and regulations will be equipment will be upgraded as well as reviewed to protect and increase the wellbeing ensuring an adequate number of healthcare of women employees.
In line with this effort, professionals, particularly those in the rural the Government aims to streamline workplace areas, to create a conducive healthcare facilities and infrastructure to be more environment.

Meanwhile, care services will also inclusive, sensitive to disabilities, and gender- be enhanced as Malaysia is moving towards an responsive.

Additionally, efforts will continue to ageing nation.
The healthcare programmes for be focused on the Bumiputera Empowerment the elderly will be strengthened and healthcare Agenda while providing sufficient support services will be digitalised.

Additionally, early to all ethnicities to promote the rakyat’s detection initiatives and efficient responses upward mobility.
These holistic measures reflect Malaysia’s commitment in fostering a to infectious disease outbreaks will be continued with the establishment of the society where every individual can thrive and National Disease Control Centre.

Mental and contribute to the nation’s prosperity.

emotional wellbeing awareness programmes Education and training are central in building based healthcare system will be empowered, workforce readiness.
Hence, the Government ultimately improving the overall quality of life will be sustained, and the community- is committed to ensure universal access to for Malaysians.

high-quality education and training.


The 40 Chapter 1.indd 40 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 feature article 1.2 Towards Equitable Development: Targeted Social Assistance Introduction The aftermath of the COVID-19 pandemic has had a profound impact on the population, posing greater challenges to the recovery journey.
This is especially true for individuals and families in poor and vulnerable households, as emphasised in the Malaysia Economic Monitor by the World Bank in February 2023.

Several studies highlighted that pre-existing issues particularly on cost of living, low savings rate and low wages that were evident even before the pandemic, have been further exacerbated.

Consequently, these factors continue to impede the progress of household recovery efforts.
Higher prices posed challenges to households with varying degrees of severity among different income groups.

Lower-income households allocate a larger portion or 23.1% of their monthly expenditure to food, in contrast to middle-income (17.1%) and higher-income households (11.2%) (DOSM, 2022).
This discrepancy implies that when inflation primarily affects prices of food items, it will disproportionately affect the lower-income households making them more susceptible to the pressure of cost of living (BNM, 2018).

The cost of living has also contributed to the low savings rate further influencing the ability of households to withstand economic shocks.
A survey conducted in 2022 revealed that 63% of respondents can only survive three months (RinggitPlus, 2022) or less with their savings, compared with 53% in 2019 (RinggitPlus, 2019).

This suggests that the number of respondents with dire emergency savings has increased.

When it comes to retirement savings, a substantial 51.5% (equivalent to 6.7 million) of Employees Provident Fund (EPF) members under the age of 55 presently maintain remarkably low savings, amounting to less than RM10,000 (BNM, 2023).
This situation points to a further decline in the sufficiency of retirement savings since the pandemic.

Prior to the pandemic, it was noted that 70% of EPF members below the age of 54 have less than RM50,000 in savings, with the bottom 20% averaging a mere RM6,909 – a level of concern that was already noteworthy as EPF members at the age of 55 are required to have basic savings of at least RM240,000 (EPF, 2019).

Further to this, wages in Malaysia remain low and sticky.
The Department of Statistics Malaysia (DOSM) through Employee Wages Statistics (Formal Sector) Report revealed that in the first quarter 2023, 35% of workers earn less than RM2,000 a month.

The report also showed that the median wage does not increase much across age groups, with those below 20 years old earning a median wage of RM1,500 a month and reaching RM3,500 between ages 45 and 49.
The confluence of issues above can pose an economic shock to vulnerable individuals and be detrimental for their overall wellbeing.

To cushion these effects, social protection is needed to act as an economic stabiliser to safeguard the wellbeing of the rakyat.

This paper will provide insights into the relationship between cash transfer-based social assistance and household resilience as an avenue to strengthen the social protection system.
The following sections will share potential policy intervention to improve the wellbeing of the rakyat.

By reviewing Malaysia’s social assistance framework and drawing from global best practices, the Government will provide a potential roadmap for the development and implementation of a more targeted, comprehensive and sustainable social assistance policy.
41 Chapter 1.indd 41 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 chapter 1 ECONOMIC MANAGEMENT AND PROSPECTS What is social protection?

The International Labour Organization (ILO) defines social protection as the set of public measures that a society provides for its members to protect them against economic and social distress.

The definition often varies from one country to another due to diverse range of initiatives falling under the umbrella of social protection.
To make a distinction, the social protection system in Malaysia consists of three broad areas, namely social assistance, social insurance and labour market intervention as highlighted in Figure 1.2.1.

FIGURE 1.2.1.
Malaysia’s Social Protection Framework SOCIAL PROTECTION SOCIAL ASSISTANCE SOCIAL INSURANCE LABOUR MARKET INTERVENTION Cash Transfers In-kind Transfers Employees Provident Fund (EPF) Contribution Upskiling and Reskilling Social Security Organisation (SOCSO) Contribution Wage Subsidies Subsidies Government Pensions Source: Ministry of Finance, Malaysia S ocial assistance is designed to transfer resources to the right segments of the population (either cash transfer or in-kind transfer) which can be universal, categorical or income-tested.
Social assistance also consists of subsidies offered by the Government such as fuel and food subsidies.

Social insurance falls within the realms of EPF and Social Security Organisation (SOCSO) contributions in which employees and employers make on a regular basis as well as Government pensions.

On the other hand, labour market intervention are policies that facilitate full or productive employment through Active Labour Market Policies (ALMPs), labour exchanges and market demands.
This includes upskilling and reskilling programmes as well as wage subsidies that encourage labour mobility.

These three components combined make up the social protection framework.

If conducted in tandem with each other, the positive externalities are wide ranging which include poverty reduction, economic stability, human capital development and social mobility, among others.
42 economic outlooK 2024 Chapter 1.indd 42 06/10/2023 7:39 PM When designing a robust social protection framework, governments must ensure long-term sustainability and continuity.

Countries capable of formulating universal social protection rely on governments with substantial and sustainable income-generation capacity.

For countries with limited fiscal space, the policy design must be balanced accordingly.
The comparison of existing social protection modalities across countries as shown in Table 1.2.1. table 1.2.1.
Comparison of Social Protection Modalities moDel norDic anGlo-Saxon continental/ biSmarcKian meDiterranean/ South Country Poverty Rate Taxation Rate Key Features Northern Europe and the North Atlantic includes Denmark, Finland, Iceland, Norway and Sweden The United Kingdom, the United States, Canada, New Zealand, Australia and Ireland Germany, Austria, Switzerland and Czech Republic Algeria, Egypt, Jordan, Lebanon, Libya, Morocco, Palestine, Syria and Tunisia Low High Low Medium Medium Medium/High High Low Comprehensive assistance6 coverage funded by the governments Combination of targeted assistance and comprehensive assistance Some social assistance programmes but heavily supported with social insurance and labour market intervention Mostly catered by family unit welfare system however the government does have cash assistance for the elderly Dependency on social insurance Government, private sector and informal (family transfers) Main Funding Solely government Combination of government and citizens (social insurance programmes) Advantages Thorough and progressive Comprehensive given the low taxation rates Favours the working group in particular Catered more towards the elderly Disadvantages Implementation may be diﬃ cult for developing countries Can lead to lack of fi nancing in the long term May cause dependency on social insurance Does not factor in other vulnerable groups beyond old age Source: Popova et al.
(2013) Although Malaysia’s current approach mirrors the Anglo-Saxon model, its coverage is more limited compared to what the model offers.

This highlights the need for a review of the social protection policy and in particular Malaysia’s social assistance (cash transfer) programmes.

The State of Social Assistance in Malaysia An analysis of Malaysia’s social assistance programmes has demonstrated several gaps that stem from two issues.
First is due to the fragmented nature of social assistance programmes involving 167 schemes that are currently being implemented by 17 ministries and agencies.

This fragmentation has led to overlapping programmes causing both inclusion and exclusion errors.
According to a survey conducted in 2018 by UNICEF, it was found that 35% of families that received financial aid were not eligible (inclusion error) and more concerning, 34% of households did not receive financial aid despite being eligible (exclusion error) (UNICEF, 2018).
43 Chapter 1.indd 43 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 Second, Malaysia’s social assistance programmes do not have legal commitments nor backed by strong financial resources resulting the programmes to be less sustainable in the long term.

Apart from Sumbangan Tunai Rahmah (STR), most of the social assistance programmes are only targeted at the hardcore poor who are considered eligible based on the poverty line index.
This may lead to some vulnerable households in the B40 groups being left behind.

For the year 2023, a total of RM63.8 billion (approximately 3% of GDP) is allocated for subsidies and social assistance.

Almost 60% of the total allocation will be utilised for broad-based fuel and electricity subsidies, while the remaining is meant for social assistance mainly in the form of STR as well as assistance programmes for welfare and education.
Although spending on subsidies and social assistance increases every year, its share to GDP for the period 2020 to 2022 is small, with an average of 2.2%.

This figure is significantly smaller compared to OECD nations which typically spend 10% of GDP in 2022 (OECD, 2022) on cash benefits only.
The gaps in Malaysia’s cash transfer-social assistance programme has also been highlighted in international indices such as the ILO’s World Social Protection Report 2020 – 2022 (ILO, 2021) and Asian Development Banks’ Social Protection Indicator (ADB, 2019).

Malaysia received a social assistance score of 2.11 which lags significantly behind its ASEAN peers such as Singapore (100), Thailand (54.3), Viet Nam (24.6), The Philippines (22.4), and Indonesia (16.5).
This score suggest that Malaysia has a coverage issue where certain segments of the vulnerable groups do not have adequate support in terms of cash transfer programmes.

Cash Transfers Still Remain Effective Despite the current gaps in Malaysia’s cash transfer programme, the effectiveness cannot be overlooked.
A study conducted in 2017 on Malaysia’s cash’s transfer programme (ISIS, 2017) found that the Bantuan Rakyat 1 Malaysia (BR1M) has benefitted millions of recipients a year, helping to alleviate inequality by increasing the disposable income of B40 household groups and spurring local economic multipliers.

Based on international standards, the scale of successful programme has generally been about 4% to 30% of household expenditure.
While the amount of BR1M barely reaches the low end of the scale, it is more than enough to solidify its position in Malaysia’s policy toolkit.

Globally, cash transfers continue to be an instrumental component of social assistance.

Selected best practices are highlighted in the Table 1.2.2 which have been showcased by the World Bank, ILO, OECD and UNICEF as successful cash transfer programmes.

There are some key findings that can be observed based on the above programmes.
Most importantly, social assistance have positive spillover effects beyond economic stability.

Looking at the cases of Brazil and Mexico, the cash transfer programmes not only provided monetary support to low-income families, but its conditionality factor played a crucial role in enhancing years of education and health among children.
The Australian and Kenyan experience highlights that categorical cash transfers can assist the most vulnerable groups throughout their life cycle 1 Proportion of vulnerable persons receiving benefits: ratio of social assistance cash benefits recipients to the total number of vulnerable persons.

44 Chapter 1.indd 44 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 table 1.2.2.
Global Best Practices nation auStralia mexico braZil thailanD KenYa Name of Programme Income Support Programme Target Group Elderly, people with disability, children and caregivers Prospera Bolsa Familia Thailand’s Child Support Grant National Safety Net Programme (NSNP) Children Children Children Categorical targeting the most vulnerable groups of the population Conditionality based on school attendance and doctor check ups Solidifi ed the government’s commitment to build a strong social security safety net that protects vulnerable Australians Additional 12 months of schooling and decline of 11.8 percentage points in the incidence of anaemia among children under age two Conditionality on school attendance and vaccination Shift to universal targeting Inequality has been cut by 17% in just fi ve years and the poverty rate has fallen from 42.7% to 28.8% Thailand is at an infl ection point where the government can aff ord universal child allowance due to the birth rate decline.
Opportunity cost for nurturing children Hardcore poor, children, people with disability and elderly Categorical targeting the most vulnerable groups of the population Cash transfers have positive impacts without creating dependency.
Benefi ciary households are less likely to be extremely poor as they use the aid for food and health expenditure Innovative Approach Impact Cost of Programme (% of GDP) 8.2 0.4 0.4 0.2 0.3 Source: World Bank, ILO, OECD and UNICEF (2013, 2014, 2022) where beneficiaries were shown to spend the aid on necessities such as food and health.

Thailand’s child allowance is a recent example of universality as they provide cash transfers for all children regardless of income to protect the future generation.
The decision by Thailand’s Government is supported by a growing body of evidence which found that cash transfers for children, even relatively small amounts, can improve child health, nutrition and development (National Library of Medicine, 2019).

Improving Malaysia’s Cash Transfer Programme Malaysia has made significant progress in its developmental journey since 1957.
With the onset of the New Economic Policy followed by the National Development Policy, National Vision Policy, Malaysia’s Shared Prosperity Vision of 2030 and most recently Malaysia MADANI, the country continues to make headways in achieving its goal of becoming a high-income and inclusive economy.

As the country develops and transitions, the social assistance programme should also evolve to reflect the development path of Malaysia.
Such plans and efforts for more effective social assistance are highlighted in the Twelfth Malaysian Plan and are also aligned with the Sustainable Development Goals (SDGs).

Specifically, they will contribute to achieving the target of SDG1 (no poverty), and SDG10 (reduced inequalities).
45 Chapter 1.indd 45 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 chapter 1 ECONOMIC MANAGEMENT AND PROSPECTS Malaysia’s current cash transfer programme is focused more on charity-based models which can leave certain segments of the population without adequate coverage.

For instance, although Malaysia provides child and elderly allowances, it only targets the hardcore poor population as shown in Figure 1.2.2.

FIGURE 1.2.2.
FIGURE 1.2.2.

Current Coverage of Cash Assistance Programmes by Household Income Excluding STR HARDCORE POOR B40 M40 T20 Children Pregnant Women People with Disability Elderly Source: Ministry of Women, Family and Community Development, Malaysia It is imperative for Malaysia to transition from narrowly-targeted and stigmatising approaches to a more comprehensive developmental programme.

In other words, instead of explicitly targeting poverty, focus will be given on addressing underlying vulnerabilities.
In this regard, risks associated with the life cycle such as: childhood, maternity and old-age; coupled with the risks of disability can be targeted with a more holistic cash transfer programme.

The shift into this developmental model can help reduce exclusion errors associated with poverty targeting whilst allowing for administrative simplicity and efficiency.
The developmental model can also improve social contracts2 as the Government can uphold its responsibility to safeguard the wellbeing and security of citizens since anyone can become vulnerable at any point of their life.

Moving forward, a potential developmental model comprised of a combination of income-tested as well as categorical base programmes can be an optimal solution in addressing vulnerable groups.

An example of such a model is shown in Table 1.2.3.
2 Building trust between Government and citizens.

Social contract in a country impacts the design of social protection programmes and the awareness process.

46 economic outlooK 2024 Chapter 1.indd 46 06/10/2023 7:39 PM table 1.2.3.
Example of Monthly Cash Transfer Programmes propoSeD proGramme tarGet Group income-teSteD conDitionalitY Hardcore Poor Allowance Households earning less than RM1,198 a month (hardcore poor) Low Income Allowance All B40 households Must submit a tax fi le and be verifi ed by IRB Child Allowance All children below 6 and those enrolled in public schools only Programme allowed to continue the following year based on vaccination and school enrolment.
cateGorical Old Person Allowance All elderly people aged 65 and above None Maternity Allowance All pregnant women None People with Disability Allowance Those registered under JKM None Source: Ministry of Finance, Malaysia Transforming Social Assistance Delivery to Ensure No One is Left Behind It is crucial for the Government to relook, reform and redesign the delivery of social assistance, particularly cash transfers to ensure inclusive and equitable protection.
This includes introducing an overarching act to oversee social protection as a whole for social assistance, social insurance and labour market intervention.

Without this act, accountability of social assistance programmes in particular, will continue to remain ambiguous and thus impacting effective implementation, including cash transfer programmes.
The implementation of cash transfer programmes can be centralised under a single existing agency to address fragmentation issues, reduce implementation costs and standardise eligibility criteria for income-tested aid.

The proposed agency can also act as the primary access point to social assistance services where potential beneficiaries can apply via a simplified application process.
To ensure successful implementation, an autonomous data management approach is needed to automate, consolidate and integrate all data management tasks, which can reduce inadvertent errors.

This necessitates the establishment of data classification framework to safeguard privacy within data sharing arrangements as well as to ensure data integrity and adherence to standard data formats.
Most importantly, in achieving inclusive and equitable protection for all, the key determinants are commitment, consistency and political will to conduct a rationalisation exercise.

The Government is cognisant that rationalising subsidies in total at this juncture may have an adverse impact 47 Chapter 1.indd 47 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 on citizens by elevating their cost of living.
However, to remain fiscally responsible, a staggered process should be adopted via a two-pronged approach by first reviewing and consolidating existing cash transfer programmes followed by subsidy rationalisation and widen the revenue base.

Conclusion The shift to the developmental cash transfer programme will ensure support and assistance to vulnerable individuals and families according to their life cycles and household circumstances in line with the spirit of the Ekonomi MADANI framework.
The programme will also provide a broad and long-term approach as compared to the existing programmes that primarily focus on meeting immediate basic needs.

In addition, the programme can have a significant impact on social mobility, reducing income inequality, and fostering overall economic development.

To begin this endeavour, we will require the commitment and consistency of a unified Malaysia to advocate for better social assistance.
For without commitment, we will never start and without consistency we will never finish.

The Government is dedicated in ensuring that every segment of society benefits from the nation’s economic prosperity, irrespective of gender, ethnicity, socio-economic status, or geographical location.

Currently, there exists a disparity between the market price of houses and what is affordable by the rakyat.
To enhance access to affordable housing, the Government will streamline and accelerate the development of affordable housing in strategic locations, including for Program Rumah Mesra Rakyat, Residensi Wilayah, and Program Perumahan Rakyat (PPR).

Moreover, the progressive initiative will be continued under the National Housing Policy (2018 – 2025), which outlines specific parameters related to housing supply, particularly affordable housing.
Hence, strategic collaborations with financial institutions will be strengthened to offer attractive, flexible, and innovative financing schemes.

In addition, a review of existing housing financing programmes is required, ensuring sustainable housing solutions for low and middle-income households to attain affordable homes.
As Malaysia strives to attain high-income status, the efficiency of the transportation and logistics sectors is paramount to achieve increased productivity and growth through enhanced connectivity.

Therefore, the 48 Government is committed to the development of sustainable, integrated, safe, reliable and affordable transportation and logistics infrastructure.
These robust infrastructures not only facilitate seamless mobility but also promote clean, convenient, and efficient modes of transport and adaptive to climate change.

In addition, availability of world class infrastructure such as airports, ports, highways and railways further reinforce Malaysia’s attractiveness as a preferred investment destination.
Thus, it is imperative that the quality of transportation and logistics infrastructure is elevated, as it lays the foundation for long-term economic growth and the wellbeing of the rakyat.

In line with the commitment to create a more liveable environment, the provision of basic amenities will be prioritised, aimed at providing high-quality, gender-sensitive, disability-friendly, and elderly-supportive infrastructure.
This includes ensuring access to treated clean water and energy supply, particularly in rural areas of Kelantan, Sabah and Sarawak.

To guarantee the safety and security of the public infrastructure, regular maintenance and upgrading will be undertaken.

Additionally, efforts to expand affordable internet access will be pursued.
Chapter 1.indd 48 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 Efforts also will be intensified to attract high- quality investments that generate well-paying jobs.

Strategies to expedite the automation and adoption of advanced technologies in production processes will be strengthened to boost productivity.
Meanwhile, the review of the minimum wage is expected to uplift the livelihoods of low-paid workers, reflecting continuous commitment towards higher and fair compensation.

Additionally, employers should view higher wages as catalysts for business productivity growth3, encouraging engagement of the locals in 3D jobs and reducing dependence on low-skilled foreign workers.

These measures collectively aim to bolster earnings, thereby empowering the workforce and fostering social mobility.
Focus 3: Good Governance through Efficient Service Delivery An effective governance ecosystem that is centred on efficiency, integrity, and transparency principles, demands unwavering commitment from all stakeholders.
Thus, the initiatives under the Budget 2024 will concentrate on reforming the ecosystem such as fortifying parliamentary and legal institutions; digitalising government services; reinforcing social resilience; ensuring fiscal sustainability; enhancing legislations; and optimising public service delivery.
At the institutional level, the primary objective is to fortify democratic elements through systematic integration of public consultation processes, transparent channels of communication, and rigorous quality audits.

These initiatives will raise awareness on new and existing policies as well as gain support from all stakeholders and public to be more engaged in policy formulation and implementation process.
Furthermore, special attention will be given to protect and promote children’s rights, aligning with the international commitments under the United Nations’ Convention on the Rights of the Child.

Meanwhile, to bolster access to legal aid services, particularly in rural areas of Sabah and Sarawak, effort will be undertaken to raise the understanding of the rakyat on the country’s legal and judicial institutions.
Recognising the vital role of social protection in bolstering community resilience, the Government is committed to augment the efficiency and effectiveness of various implementing agencies through the Pangkalan Data Utama (PADU) as the national repository of socioeconomic data.

This strategy is crucial to support accurate and transparent distribution of socioeconomic assistance and targeted subsidies in eradicating poverty, thus enhance the social protection system within the society.
An effective fiscal policy requires a proactive and more holistic approach of fiscal management, encompassing prudent measures, credible institutional and governance structure, as well as transparent reporting.

Therefore, the Government’s fiscal policy is aimed at strengthening public finances and rebuilding fiscal buffers to supporting the economic growth.
The Government will continue to pursuing fiscal reform initiatives by enacting the FRA, enhancing revenue mobilisation, broadening the tax base, optimising expenditures effectively, and formulating the Government Procurement Act (GPA), guided by the Medium-Term Fiscal Framework.

These efforts are aimed at ensuring long-term fiscal sustainability and supporting the nation’s development agenda.
Enhancing governance with strong ethical foundations, as well as fostering accountability, transparency and integrity among public servants, is vital in serving the interests of the nation.

As outlined in the National Anti- Corruption Plan (NACP) 2019 – 2023, the Government will intensify efforts to combat corruption mainly by upholding the rule of law, 3 Analysis by EU-ERA in 2022 showed that increasing wages can create a positive cycle where higher wages lead to increased productivity.
Every percentage increase in wages could expand labour productivity by 2.2% compared to every percentage increase in labour productivity will merely increase wages by 0.2%.

49 Chapter 1.indd 49 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 restructuring the public service administration, fostering the concept of good governance and integrity within the business environment.
In boosting the productivity and efficiency of public services, it is imperative to foster the culture of innovation, active public engagement, inter-agency collaboration, and effective leadership.

Efforts will emphasise on streamlining the functions and roles of agencies, empowering governance, reducing bureaucracy, enforcing accountability, promoting transparency, and enhancing public trust.
Furthermore, the Budget 2024 will empower the Special Task Force on Agency Reform (STAR) to continue its effort on improving efficiency of work processes and encouraging collaborative efforts among ministries and agencies.

The Government remains steadfast towards digital transformation through process re-engineering, as evidenced by the implementation of Government Technology (GovTech).
Public services that are people- centric, readily available, efficient, transparent, and user-friendly are the driving force behind this strategic approach.

The Government will focus on single digital identity initiative, which facilitate self-verification and identification via online services.

This aspiration will fortify the Government’s commitment to effective governance and prudent resource allocation.
Conclusion The nation’s strong economic fundamentals coupled with strategies and programmes as outlined in the Budget 2024, will continue to support the momentum of the economy to grow with the estimated range of 4% to 5% in 2024.

Hence, the Ekonomi MADANI framework, which aimed at building a better malaysia together, underscores the collective commitment and dedication from all stakeholders to ensure the successful realisation of the economic development goals and national aspirations.
In this context, the Government will facilitate industry transformation and productivity growth through the formulation of evidence-based policies and the provision of a conducive business environment.

The Budget 2024 will prioritise initiatives that nurture future generation and improve standard of living.

The Government will focus on efficiency in the implementation of initiatives and programmes through empowering good governance and fostering an agile public service delivery.
Collectively, adopting a whole-of-nation approach will elevate the overall competitiveness and safeguard the nation’s wealth, ultimately enhancing the wellbeing of the rakyat towards sustainable, prosperous, and high-income nation.

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https://www.worldbank.org/en/news/ feature/2014/11/19/un-modelo-de-mexico- para-el-mundo 56 Chapter 1.indd 56 06/10/2023 7:39 PM chapter 1 economic management and prospectseconomic outlook 2024 chapter 2 Macroeconomic Outlook 59 ov e rv i e w 60 econom y i n 2023 g loba l econom y Information Box 2.1 – ASEAN Taxonomy for Sustainable Finance: Building a Sustainable ASEAN d ome s t ic econom y Feature Article 2.1 – Towards an Investment- Driven Economy for a Sustainable Growth in Malaysia Feature Article 2.2 – Navigating High-Impact Economic Growth through Direct Investment 97 outlook for 202 4 g loba l outlook d ome s t ic outlook 103 conclus ion 10 4 r e fe r e nce s Chapter 2 2024.indd 57 06/10/2023 5:48 PM Chapter 2 2024.indd 58 06/10/2023 5:48 PM chapter 2 Macroeconomic Outlook Overview Persistent external uncertainties testing the resiliency of Malaysia’s economy Global growth is projected to moderate in 2023 and 2024 following slow growth in advanced economies; volatile financial market due to tightening monetary policy; prolonged geopolitical tensions; and increasing climatic changes.
Nevertheless, inflation continues to soften as markets head towards supply chain stabilisation.

In addition, world trade is projected to moderate in 2023 in line with weaker global demand.

However, global trade is expected to increase in 2024 in tandem with improved trade activity in advanced economies, and emerging market and developing economies (EMDEs).

In the case of Malaysia, the economy continued to expand amid these persistent challenges in the external environment.
During the first half of 2023, GDP posted a growth of 4.2% supported by resilient domestic demand, in particular private expenditure.

The services sector, the largest contributor to the economy, continued to lead growth following higher tourist arrivals and improved consumer spending.

The construction sector continued to expand in tandem with the acceleration of infrastructure projects and realisation of investment in non-residential and residential developments.
These developments helped to cushion the negative impact from the external sector following slow external demand, particularly from Malaysia’s major trading partners.

The increased external uncertainties will pose risks to the economic growth.

Notwithstanding these challenges, the economy continues reaping the benefit from policies and initiatives undertaken over the years to enhance resilience and competitiveness.
Overall, the economy is projected to expand moderately in the second half of the year as external demand is expected to remain low and high base effect from the previous year.

Nevertheless, domestic demand will continue to drive growth.

Hence, the GDP is anticipated to register a growth of approximately 4% in 2023.

For 2024, the economy is projected to grow within the range of 4% to 5%.
The growth is envisaged to be broad-based, led by the services sector as intermediate and final services groups are anticipated to rise further driven by sustained domestic consumption and improved export activities.

The retail trade, accommodation and restaurants as well as communication segments are expected to increase in line with consumption trend, while the wholesale trade segment and transport and storage subsector will benefit from higher trade-related activities.
The manufacturing sector is expected to accelerate, accounted by improved export- oriented industries particularly the E&E products as external demand recovers, while the domestic-oriented industries are anticipated to remain favourable in line with robust domestic consumption and investment.

The construction sector is expected to grow supported by an expansion across all subsectors.
Prospects for the agriculture sector remain positive supported by higher production of crude palm oil (CPO), other agriculture and livestock.

The mining sector is estimated to turn around owing to the recovery in production of natural gas, and crude oil and condensates.

On the demand side, growth will be buoyed by strong private sector expenditure and improving global demand.
The encouraging performance of private sector is partly due to the Government’s deliberate efforts to accelerate a more vibrant and dynamic private sector by providing a conducive business and investment environment, underpinned by the implementation of comprehensive Ekonomi MADANI framework as well as policies and blueprints such as the National Energy Transition Roadmap (NETR) and New Industrial 59 Chapter 2 2024.indd 59 06/10/2023 5:48 PM economic outlook 2024chapter 2 macroeconomic outlook Master Plan 2030 (NIMP 2030).
Meanwhile, consumer spending is envisaged to be robust supported by improved labour market conditions.

Furthermore, recovery in external demand is anticipated to boost exports performance, leading to a larger trade surplus.

This surplus is attributed to higher export receipts from the goods account, which will cushion the net outflows from transport and other services accounts.

Thus, the current account is projected to post a surplus of RM62.2 billion or 3.2% of gross national income (GNI).
On the income front, an encouraging economic growth projected in 2024 will stimulate higher income for the workforce.

Strengthening existing initiatives by adopting advanced technology in production activities and enhancing productivity through continuous improvement in retraining and upskilling may also contribute in higher income for workers.

Hence, the labour income share is expected to improve further in moving towards Ekonomi MADANI aspiration to achieve 45% share of GDP in long-term period.
Economy in 2023 Global Economy Lacklustre global recovery Global growth is projected to expand at 3% due to the slow post-pandemic global recovery, prolonged geopolitical tension and the increase in interest rates by various economies to manage inflation.

The GDP growth in advanced economies is expected to moderate at 1.5% due to subdued manufacturing activities in advanced economies despite strong services sector.
In this respect, the US’s economy is anticipated to record 1.8%, underpinned by lower domestic consumption as well as further Fed rate hikes.

The euro area is expected to grow marginally at 0.9%, following the effect of monetary policy tightening despite improvements in the services and tourism activities.

The EMDEs’ economic growth is expected to register 4%, which is stronger than advanced economies.

However, the growth rate among 60 EMDEs varies across regions.
Despite subdued investment in the real estate sector, China’s economy is anticipated to expand at 5.2%, contributed by higher net exports following relaxation of lockdown policies.

Meanwhile, India’s economy is projected to grow 6.1% buoyed by stronger domestic investment.

Similarly, the GDP growth of ASEAN-5 is envisaged to expand at 4.6%.

World trade is expected to moderate further to 2%, reflecting the weaker path of global demand and the shift towards domestic services.
Trade in advanced economies and EMDEs are expected to register a slower growth of 2.3% and 1.5%, respectively.

Among others, the strengthening of the US dollar is projected to eventually slow trade activities, affecting EMDEs more adversely compared to advanced economies.

Meanwhile, global inflation is anticipated to record 6.8%, attributed to easing food and energy prices as well as weakening of global economic activities.

FIGURE 2.1.
Global Gross Domestic Product, Trade and Inﬂation Growth 2022 – 2024 (% change) % 10 8 6 4 2 0 5.2 3.5 3.0 3.0 3.7 2.0 2022 20231 GDP 20242 2022 20242 20231 TRADE 8.7 6.8 5.2 2022 20231 INFLATION 20242 GLOBAL ADVANCED ECONOMIES EMERGING MARKET AND DEVELOPING ECONOMIES 1 Estimate 2 Forecast Note: Trade for Advanced Economies and Emerging Market and Developing Economies refers to the average volume of exports and imports of goods and services This document was finalised before the publication of the World Economic Outlook, October 2023 Source: International Monetary Fund, World Economic Outlook Update (July 2023) Chapter 2 2024.indd 60 06/10/2023 5:48 PM economic outlook 2024chapter 2 macroeconomic outlook information box 2.1 ASEAN Taxonomy for Sustainable Finance: Building a Sustainable ASEAN Introduction to ASEAN Taxonomy ASEAN recognises the importance of sustainable finance in the region and the necessity to create a credible and inclusive regional sustainable finance taxonomy.
The taxonomy would serve as a standardised classification framework, providing clear guidelines and definitions for sustainable economic activities and financial instruments within the ASEAN region.

The ASEAN Taxonomy for Sustainable Finance (ASEAN Taxonomy) aims to guide investors, issuers, regulators and other stakeholders in the ASEAN region to align their investment and activities with the region’s sustainability goals taking into account the diversity of the region.
This taxonomy is designed to be interoperable with existing regional and international sustainable finance taxonomies, promoting cross-border investments and global collaboration in addressing environmental and social challenges.

Development of the ASEAN Taxonomy for Sustainable Finance Recognising the imperative need to establish a robust framework for sustainable finance, an ASEAN Taxonomy Board (ATB) was established in March 2021 with a mandate to develop, maintain, and promote an ASEAN Taxonomy.
The ATB then developed ASEAN Taxonomy Version 1 in November 2021 followed by Version 2 in March 2023 to harmonise ASEAN financial system with sustainability principles.

The ASEAN Taxonomy consists of two main elements: i. ii.

The Foundation Framework which is applicable to all ASEAN Member States (AMS) and allows a qualitative assessment of activities; and The Plus Standard with metrics and thresholds to further qualify and benchmark eligible green activities and investments.
The environmental objectives of the ASEAN Taxonomy are universal and applicable to all AMS, in alignment with national environmental laws.

These objectives include climate change and adaptation, protection of healthy ecosystems and biodiversity; promotion of resource resilience; and transition to circular economy.

Meanwhile, the Plus Standard provides details on how to determine if an economic activity is in accordance with the ASEAN Taxonomy.
The ASEAN Taxonomy Board ATB membership comprises representatives from the four ASEAN finance sectoral bodies i.e., the ASEAN Capital Markets Forum (ACMF), the ASEAN Senior Level Committee on Financial Integration (SLC), the Working Committee on Capital Market Development (WC-CMD) and the ASEAN Insurance Regulators Meeting (AIRM).

Members of the Board comprise organisations from all 10 AMS, selected by their respective sectoral bodies.
This ensures that every ASEAN country has a voice in developing the ASEAN Taxonomy.

Malaysia is represented on the ATB by the Securities Commission Malaysia (SC) and Bank Negara Malaysia (BNM).

In addition, SC chairs the ATB’s Working Group on Market Financing and Resourcing while BNM, chairs the ATB’s Working Group on Conceptual Framework and Principles.
61 Chapter 2 2024.indd 61 06/10/2023 5:48 PM economic outlook 2024chapter 2 macroeconomic outlook ASEAN Taxonomy Version 1 The ASEAN Taxonomy Version 1 covers six economic focus sectors, which were identified based on their environmental and economic importance to ASEAN, aligned to the International Standard Industrial Classification (ISIC).

These focus sectors are: i. ii.

Agriculture, forestry and fishing; Electricity, gas, steam, and air conditioning supply (Energy); iii.

Manufacturing; iv.
Manufacturing; iv.

Transportation and storage; v. Water supply, sewerage, water management and remediation activities; and vi.

Construction and real estate activities.

In addition to these six focus sectors, the ATB also identified three enabling sectors, which play a crucial role in enhancing the performance of sectors and activities, and are essential for decarbonising the economy.

Importantly they do not compromise the environmental objectives of the Taxonomy.

These enabling sectors are: i. ii.


Information and Communication Technology (ICT); Professional, scientific, and technical activities; and iii.

Carbon Capture, Utilisation, and Storage (CCUS).

In Version 1, it was established that the four environmental objectives and two essential criteria of the ASEAN Taxonomy would apply to all AMS, players in the financial sector, as well as business enterprises.
These environmental objectives were of equal importance and were designed to be interoperable with the six environmental objectives of the European Union (EU) Taxonomy.
The ASEAN Taxonomy’s environmental objectives and essential criteria consist of: Environmental Objective § Environmental Objective 1: Climate change mitigation; § Environmental Objective 2: Climate change adaptation; § Environmental Objective 3: Protection of healthy ecosystems and biodiversity; and § Environmental Objective 4: Promote resource resilience and transition to a circular economy.
Essential Criteria § Essential Criteria 1: Do no significant harm (DNSH); and § Essential Criteria 2: Remedial measures to transition.

The ASEAN Taxonomy aims for maximum inclusivity, taking into account the different stages of economic development, financial sector maturity and infrastructure readiness among AMS.
The Foundation Framework is applicable to all AMS, financial sector stakeholders and business 62 Chapter 2 2024.indd 62 06/10/2023 5:48 PM economic outlook 2024chapter 2 macroeconomic outlook enterprises.

It employs a qualitative, sector-agnostic criteria and decision flow in order to assess activities.

Under the Foundation Framework, economic activities must fulfil at least one of the Taxonomy’s environmental objectives and both essential criteria.
Consequently, these activities can be classified as either Green, Amber or Red within the Foundation Framework.

The Plus Standard consists of Technical Screening Criteria (TSC) for activities within each focus sector.

It serves as an additional guidance and scope for AMS to further qualify eligible activities and investments, aligning them with goals in-line with the Paris Agreement.
This standard also sets activity-level criteria to assess an activity’s contribution to the Taxonomy’s environmental objectives.

The Plus Standard takes a ‘stacked approach’ in developing activity-level thresholds.

It incorporates different thresholds for multiple decarbonisation pathways for each activity, resulting in more than one threshold referenced at a single point in time, as shown in Figure 2.1.1.
Under the Plus Standard, activities can be classified as either Green, Amber or Red based on their compliance.

FIGURE 2.1.1.

Plus Standard ‘stacked approach’ in developing activity-level thresholds Upper limit established by specified metric (e.g.

average emissions of that activity in the region) ) s n o i s s i m e .

.
g e ( s c i r t e m c i f i c e p S Tier 3: Entry A performance level not meeting T1 but above business as usual and will be retired at an established point in time Tier 2: Intermediate A performance level not meeting T1 but contributing significantly, and will be retired at an established point in time Tier 1: Advanced This is the tier where the performance level is aligned with global net zero targets and/or Paris Agreement Year Source: Securities Commission Malaysia ASEAN Taxonomy Version 2 Declining threshold set by science-based trajectory to net zero Following a series of consultation with targeted stakeholders, Version 2 of the ASEAN Taxonomy was released in March 27, 2023.
This version expands upon the conceptual thinking of the multi- tiered framework set out in Version 1.

The ASEAN Taxonomy is meant to be interoperable with the EU Taxonomy and other national Taxonomies of AMS.

In Version 2, Essential Criteria 3 was introduced to promote social aspects as illustrated in Figure 2.1.2.

Social aspects focus on the following: i. ii.

Promotion and protection of human rights; Prevention of forced labour and protection of children’s rights; and iii.
Impact on people living close to investments.

Chapter 2 2024.indd 63 06/10/2023 5:48 PM 63 economic outlook 2024chapter 2 macroeconomic outlook FIGURE 2.1.2.

The Design of the ASEAN Taxonomy Version 2 Qualitative based sector-agnostic screening criteria and decision flow Foundation Framework (FF) Green - FF Amber - FF Red - FF Plus Standard (PS) Technical Screening Criteria for 6 Focus Sectors and 3 Enabling Sectors Focus Sectors Enabling Sectors 1.

Agriculture, forestry and fishing; 2.


Electricity, gas, steam, and air conditioning supply (Energy); 3.

Manufacturing; 4.

Transportation and storage; 5.

Water supply, sewerage, water management and remediation activities; and 6.

Construction and real estate activities.

1.

Information and Communication Technology (ICT); 2.

Professional, scientific, and technical activities; and 3.

Carbon Capture, Utilisation, and Storage (CCUS).
Green - Tier 1 Amber - Tier 2 Amber - Tier 3 Red - PS 1 3 Enviromental Objectives 2 Climate change mitigation Climate change adaptation Protection of healthy ecosystems & biodiversity 4 Promote resource resilience and transition to circular economy Essential Criteria 1 Do no significant harm 2 Remedial measure to transition 3 Social aspects Source: Securities Commission Malaysia A unique feature introduced in Version 2 is the criteria governing the early retirement of coal-fired power plants, also known as coal phase-out.
This feature emphasises a just transition to address the needs of affected communities and industries.

By addressing the developmental needs of AMS, the ASEAN Taxonomy aims to mitigate potential social and economic disruptions that might arise during this transformative period.

By classifying coal phase-out as a green activity and maintaining strict evaluation standards, the ASEAN Taxonomy incentivises and promotes a shift towards cleaner and more sustainable energy alternatives within the region.
This approach serves as a progressive and proactive measure to combat climate change and enhance environmental protection in ASEAN.

Impact on ASEAN and Malaysia The ASEAN Taxonomy has generated significant global interest, not only as the first regional transition taxonomy published globally, but also for its specific treatment of important aspects of transition such as coal phase-out.
It also provides an important signal of the region’s collective commitment towards a sustainable ASEAN and models an example of an inclusive yet credible classification system for sustainable activities that will help equalise climate outcomes across the AMS.

Subsequently, ASEAN Taxonomy will be a key to attracting international investments and financial flows into sustainable projects in the region.
For Malaysia, the BNM and SC have been working closely to ensure the ASEAN Taxonomy is aligned with the Climate Change and Principle-based Taxonomy (CCPT) issued by BNM, and the Sustainable and Responsible Investment (SRI) Taxonomy issued by the SC.

The implementation of CCPT and SRI in the Malaysian financial system as well as the adoption of the ASEAN Taxonomy will boost more investment flow and foreign funds into the country.
64 Chapter 2 2024.indd 64 06/10/2023 5:48 PM economic outlook 2024chapter 2 macroeconomic outlook Moving Forward Version 2 of the ASEAN Taxonomy is undergoing a stakeholder consultation process, following which the TSC for the Energy sector is expected to be finalised in early 2024.

The ASEAN Taxonomy is a living document subject to frequent revisions to incorporate latest technological, scientific, and economic developments.
In line with this approach, TSCs for the remaining five focus sectors and two enabling sectors are currently in development and will be introduced in phases.

Conclusion The ASEAN Taxonomy represents the collective commitment and dedication of AMS in transitioning towards a sustainable region.
It is designed to be an inclusive and credible classification system for sustainable activities and will be one of the game changers for attracting investments and financial flows into sustainable projects in the region.

The framework is designed to be credible and science-based, while being inclusive and catering to the different development stages of its member states.
A regional green taxonomy that is aligned with international benchmarks would be useful for policymakers, financial market stakeholders and international investors in sustainable financing decisions.

It underscores ASEAN’s commitment to sustainability, ensuring that its journey towards a greener and more resilient future is supported by a robust framework accessible to all member states.
Chapter 2 2024.indd 65 06/10/2023 5:48 PM 65 economic outlook 2024chapter 2 macroeconomic outlook Domestic Economy Sectoral Services Sector Tourism industry recovery, rejuvenates the sector The services sector increased by 6% in the first half of 2023, mainly attributed to the wholesale and retail trade; transportation and storage; and food & beverages and accommodation subsectors.

However, finance and insurance contracted during the period.
The performance of the sector in the second half of the year is anticipated to rise by 5.1% driven by tourism- and travel-related subsectors following higher tourist arrivals and improved consumer spending.

Overall, the sector is projected to grow by 5.5% in 2023, with nearly all subsectors recording positive growth, except for the finance and insurance subsector.

TABLE 2.1.
Gross Domestic Product by Sector, 2022 – 2024 (at constant 2015 prices) SHARE (%) CHANGE (%) 20231 2022 20231 20242 Services 59.3 10.9 Manufacturing Agriculture Mining Construction 23.5 6.3 6.1 3.6 GDP 100.0 8.1 0.1 2.6 5.0 8.7 5.5 1.4 0.6 -0.8 6.3 5.6 4.2 1.2 2.7 6.8 ∼ 4.03 4.0 – 5.0 1 Estimate 2 Forecast 3 Approximate Note: Total may not add up due to rounding and exclusion of import duties component Source: Department of Statistics and Ministry of Finance, Malaysia The wholesale and retail trade subsector grew by 7% in the first half of 2023, with robust performance observed, especially in retail trade and motor vehicle segments.
The growth of the subsector was driven by the retail trade segment, propelled by higher consumer 66 TABLE 2.2.
Services Sector Performance, 2022 – 2024 (at constant 2015 prices) SHARE (%) CHANGE (%) 2023¹ 2022 2023¹ 20242 30.1 13.5 5.8 5.6 11.3 11.2 0.8 5.2 -1.3 5.0 4.3 6.5 7.5 22.7 7.3 5.4 6.9 30.8 14.5 7.4 5.2 33.0 10.4 7.9 Wholesale and retail trade Finance and insurance Information and communication Real estate and business services Transportation and storage Food & beverages and accommodation Utilities Other services Government services Services 4.5 7.7 15.6 3.4 9.3 5.0 100.0 10.9 3.3 6.4 4.9 5.5 5.3 5.0 4.7 5.6 1 Estimate 2 Forecast Note: Total may not add up due to rounding Source: Department of Statistics and Ministry of Finance, Malaysia spending in non-specialised stores.
Meanwhile, the motor vehicles segment benefitted from an upward momentum in total industry volume (TIV) subsequent to the fulfilment of backlog bookings made during the sales tax exemption period in 2022 and new model launches.

The wholesale trade segment experienced moderate growth, in tandem with the gradual recovery in the global supply chain.
The subsector is expected to expand by 4.8% in the second half of the year, following improvement in all segments, especially the retail trade, attributed to higher tourist expenditure, special appreciation in terms of aids for civil servants and pensioners as well as e-wallet credit incentives for targeted groups.
The motor vehicles segment is also anticipated to grow supported by continuation of high order books for the whole year in line with the upward revision of TIV for vehicle sales in 2023 from 650,000 to 725,000 units.

Subsequently, the subsector is projected to record a significant growth of 5.8% in 2023.
Chapter 2 2024.indd 66 06/10/2023 5:48 PM economic outlook 2024chapter 2 macroeconomic outlook Volume Index of Wholesale & Retail Trade (2015 = 100) WHOLESALE & RETAIL TRADE RETAIL TRADE WHOLESALE TRADE MOTOR VEHICLES 0 J A J 2021 O J A J 2022 O J J A 2023 Information and Communication Index (2015 = 100) INFORMATION AND COMMUNICATION COMPUTER AND INFORMATION SERVICE TELECOMMUNICATIONS PUBLISHING AND BROADCASTING ACTIVITIES FIGURE 2.2.
Selected Indicators for the Services Sector Tourist Arrivals and Receipts RM billion 120 TOURIST RECEIPTS TOURIST ARRIVALS (RIGHT SCALE) Million 42 Index 200 100 80 60 40 20 0 35 28 21 14 7 0 2019 2020 2021 2022 20231 160 120 80 40 Container Handling and Ship Calls Million 30 TEUs SHIP CALLS (RIGHT SCALE) Units 60,000 Index 240 25 20 15 10 5 0 2019 2020 2021 2022 20231 50,000 40,000 30,000 20,000 10,000 0 200 160 120 80 40 0 Q1 Q2 Q3 2019 Q4 Q1 Q2 Q3 2020 Q4 Q1 Q2 Q3 2021 Q4 Q1 Q2 Q3 2022 Q4 Q1 Q2 2023 Air Passengers and Cargo Electricity Consumption Million tonne 1.5 AIR CARGO PASSENGER TRAFFIC (RIGHT SCALE) 1.2 0.9 0.6 0.3 0.0 1 Estimate 2019 2020 2021 2022 20231 Million 150 120 90 60 30 0 Million kilowatt-hours 18,000 DOMESTIC AND PUBLIC LIGHTING INDUSTRIAL, COMMERCIAL AND MINING 15,000 12,000 9,000 6,000 3,000 0 J A O J J 2021 A J 2022 O J J A 2023 Source: Department of Statistics, Malaysia; Malaysia Airports Holdings Berhad; Malaysia Tourism Promotion Board; Senai International Airport; and seven major ports (Bintulu, Johor, Klang, Kuantan, Kuching, Pulau Pinang and Tanjung Pelepas) 67 Chapter 2 2024.indd 67 06/10/2023 5:48 PM economic outlook 2024chapter 2 macroeconomic outlook The transportation and storage subsector expanded by 15.2% in the first half of 2023, attributed to the increase in passenger traffic, particularly in land and air transport segments as well as supporting activities related to airports and highway operations.
The land and air transport segments' growth were mainly driven by robust tourism-related activities following higher traffic volume in toll highways and airports, which increased by 7% to 456 million vehicles and 90.7% to 40.4 million passengers, respectively.

In the second half of 2023, the subsector is expected to increase by 13.7% supported by the land transport segment, particularly road and rail transports on the back of state elections, festivities and school holidays.
The performance of air cargo is anticipated to moderate due to softer performance in global trade, which is offset by the notable performance of air passenger traffic, in tandem with the additional number of flights to several main and new routes such as Istanbul, Okinawa and Tashkent.

The water transport segment is forecast to grow at a slower rate, however it remains as a significant contributor to the growth of the subsector.

Overall, the subsector is projected to rise by 14.5% in 2023.
The food & beverages and accommodation subsector is projected to record a significant growth of 10.4% in 2023 following the expansion in all segments.

The subsector grew by 10.7% in the first half of 2023 supported by high hotel occupancy rates and patronage at eateries, mainly attributed to the increase of tourist arrivals to 9.2 million.

The subsector is expected to increase by 10.1% in the second half of the year, on the back of vibrant tourism related activities.
The favourable outlook is in line with the revised projection of 18.6 million tourist arrivals in 2023 by the Ministry of Tourism, Arts and Culture.

The upsurge revision is echoed in the Global Muslim Travel Index 2023, of which Malaysia continues to maintain the top position as a Muslim travel destination for five consecutive years.
68 The real estate and business services subsector rose by 9.8% in the first half of 2023 supported by higher demand for professional services, particularly in engineering-, accounting- and architectural-related activities, as well as the increase in real estate agents and brokers activities.
The subsector is expected to grow by 5% in the second half of the year driven by the higher demand for professional services following the vigorous construction-related activities and consulting services by diverse industries.

Likewise, the real estate segment is also anticipated to boost the subsector with various Government’s initiatives primarily for the households in the B40 and M40 income groups.
These initiatives include the introduction of affordable housing ownership and renting under the MADANI Neighbourhood scheme, continuation of 100% stamp duty exemption for first-time homeowners on the purchase of properties valued at up to RM500,000 as well as enhancement of the loan scheme under the Syarikat Jaminan Kredit Perumahan Berhad by increasing financing guarantees up to 120% of the house price up to RM300,000.

For the year, the subsector is expected to grow by 7.3%.
The information and communication subsector rose by 3.7% in the first half of 2023 and expected to grow by 6.2% in the second half of the year following attractive and affordable internet packages with devices, for high-speed connectivity such as 5G RAHMAH Package and RAHMAH Public Servant Postpaid Incentive.

These packages, which are offered by major telecommunication companies are expected to further increase the internet subscription rate.

Therefore, the subsector is projected to rise by 5% in 2023.
Meanwhile, the utilities subsector rose by 2.3% in the first half of 2023 and is estimated to increase further by 4.3% in the second half of the year.

For the year, the subsector is expected to expand by 3.3% supported by higher electricity consumption by commercial and residential segments in tandem with the hot weather from the El Niño phenomenon.
Chapter 2 2024.indd 68 06/10/2023 5:48 PM economic outlook 2024chapter 2 macroeconomic outlook During the first half of 2023, the finance and insurance subsector contracted by 1.3% due to slow credit growth within the banking segment and a notable increase in claims, particularly from life insurance policyholders.

In the second half of the year, the subsector is projected to continue a negative trajectory at 1.2% due to a surge in payouts for medical claims in the insurance segment.
This, in turn, will weigh down the overall subsector’s performance with a contraction of 1.3% in 2023.

The other services subsector grew by 6.8% in the first half of 2023 contributed by entertainment and recreational activities, in line with increasing momentum in domestic tourism.

The subsector is expected to expand by 6% in the second half of the year, driven by sustained demand for private education as well as healthcare services following continuous effort to promote health tourism.
Overall, the subsector is anticipated to grow by 6.4% in 2023.

Meanwhile, the government services subsector recorded a growth of 5.3% in the first half of 2023 owing to additional salary increment of RM100 for public servants.

The subsector is expected to expand by 4.5% in the second half and 4.9% for the whole year.
Manufacturing Sector Growth driven by domestic-oriented industries The manufacturing sector grew by 1.7% during the first half of 2023 underpinned by resilient domestic-oriented industries amid sluggish external demand.

The domestic- oriented industries’ steady growth of 4.4% was backed by increasing demand for consumer goods and construction-related segments.
Meanwhile, export-oriented industries expanded marginally by 0.5% weighed down by the lower production of E&E due to cyclical downturn in global semiconductor industry.

The sector is forecast to grow by 1.2% in the second half of the year with domestic- oriented industries remain as the mainstay of growth.

All segments are projected to expand particularly food and beverages, as well as transport equipment.
These segments will benefit from the strengthening of tourism activities and increasing demand for passenger cars and related motor parts and accessories.

In addition, anticipated acceleration and realisation of projects in the construction sector will increase the demand for metal- related segments.
Meanwhile, within the export-oriented industries, the E&E segment is expected to pivot away from the downcycle trend, in line with gradual improvements in global demand especially for computing devices, electronics and semiconductors as well as growing domestic demand for industrial electronics, electric vehicles (EV) and medical technology devices.

Furthermore, the demand for chemicals segment is expected to increase in line with the bottom out of E&E downcycle.
Hence, the manufacturing sector is anticipated to register a modest growth of 1.4% in 2023.

FIGURE 2.3.

Output of Manufacturing Sector (% change) % 70 60 50 40 30 20 10 0 -10 -20 -30 -40 J A J O J A J O J 2021 2022 J A 2023 MANUFACTURING PRODUCTION INDEX INDUSTRIAL PRODUCTION INDEX Source: Department of Statistics, Malaysia 69 Chapter 2 2024.indd 69 06/10/2023 5:48 PM economic outlook 2024chapter 2 macroeconomic outlook TABLE 2.3.
Manufacturing Indices by Export- and Domestic-Oriented Industries, January – July 2022 and 2023 (2015 = 100) INDEX CHANGE (%) SHARE (%) 2022 2023 2022 2023 2022 2023 Export-oriented industries Manufacture of vegetable and animal oils and fats Manufacture of textiles Manufacture of wearing apparel Manufacture of wood and products of wood and cork, except furniture; manufacture of articles of straw and plaiting materials Manufacture of coke and refined petroleum products Manufacture of chemicals and chemical products Manufacture of rubber products Manufacture of plastics products Manufacture of computer, electronics and optical products Manufacture of electrical equipment Manufacture of machinery and equipment n.e.c.
Manufacture of furniture Domestic-oriented industries Manufacture of food processing products Manufacture of beverages Manufacture of tobacco products Manufacture of leather and related products Manufacture of paper and paper products Printing and reproduction of recorded media Manufacture of basic pharmaceuticals, medicinal chemical and botanical products Manufacture of other non-metalic mineral products Manufacture of basic metals Manufacture of fabricated metal products, except machinery and equipment Manufacture of motor vehicles, trailers and semi-trailers Manufacture of other transport equipment Other manufacturing Repair and installation of machinery and equipment -4.5 6.0 5.7 13.7 4.6 5.1 - -3.8 5.8 -6.5 1.1 4.3 -9.6 -5.5 0.6 0.2 0.8 - Manufacturing 134.4 136.3 8.8 1.4 100.0 100.0 Note: Total may not add up due to rounding Source: Department of Statistics and Ministry of Finance, Malaysia 70 Chapter 2 2024.indd 70 06/10/2023 5:48 PM economic outlook 2024chapter 2 macroeconomic outlook Agriculture Sector Anticipated to grow marginally The agriculture sector declined by 0.1% in the first half of 2023 as all subsectors recorded lacklustre performance, except for other agriculture.
The oil palm subsector, the major contributor in the agriculture sector, shrank during the period on the back of lower production of CPO from Peninsular Malaysia.

This production was affected by slow manuring activities in the previous year, shorter working period following a series of festivities as well as hot weather condition.

Likewise, the decrease in natural rubber output has led to a contraction in the rubber subsector.
The rubber production from the smallholdings segment, which accounted about 86% of total production, waned by 9%, while output from the estates segment decreased by 2.7%.

In addition, other subsectors recorded negative growth during the period, partly due to unfavourable weather condition.

For the second half of the year, the sector is forecast to expand by 1.1% mainly supported by the oil palm, other agriculture and livestock subsectors.
The oil palm subsector is projected to increase on account of higher TABLE 2.4.
Value-added in the Agriculture Sector, 2022 – 2024 (at constant 2015 prices) SHARE (%) 20232 CHANGE (%) 20232 2022 20243 Oil palm Other agriculture¹ Livestock Fishing Forestry and logging Rubber 36.4 29.1 16.7 11.4 4.8 1.6 3.8 -3.2 0.1 2.5 -3.6 0.4 3.4 0.7 -1.9 -5.5 -19.7 -10.1 Agriculture 100.0 0.1 0.6 1.1 3.5 1.2 -1.2 -6.8 0.6 1.2 fresh fruit bunches production, following peak harvest season and further improvement in labour supply.
Other agriculture and livestock subsectors are forecast to record positive growth, underpinned by better production on the back of growing demand from domestic market.

Overall, agriculture sector is estimated to grow marginally by 0.6% in 2023.

Mining Sector Subdued growth outlook The mining sector turned around to record 0.1% growth in the first half of 2023.

This was supported by improved performance of crude oil and condensate as well as other mining & quarrying and supporting services subsectors.
Meanwhile, natural gas subsector was subdued following interruption of operations in Peninsular Malaysia and plant shutdown in Sarawak.

The mining sector’s performance is anticipated to contract by 1.7% in the second half of the year, owing to lower production of crude oil and condensate as well as natural gas.

The decline in production is due to plant maintenance shutdown at several oil and gas fields as well as lower external demand for liquefied natural gas (LNG) amid challenging global environment.
Against this backdrop, growth in the mining sector is projected to contract by 0.8% in 2023.

With regard to oil prices, the Brent crude oil is anticipated to average around USD80 per barrel in 2023, partly due to dampening demand following weaker-than-expected recovery in China's economy and moderate global growth.

However, proactive oil market management by OPEC+, as well as continued investments in the oil sector are envisaged to provide some support to prices.
Construction Sector Steady growth across the sector 1 Including paddy, fruits, vegetables, coconut, tobacco, tea, flowers, pepper, cocoa and pineapple 2 Estimate 3 Forecast Note: Total may not add up due to rounding Source: Department of Statistics and Ministry of Finance, Malaysia The construction sector improved steadily by 6.8% in the first half of 2023 mainly driven by the civil engineering and special construction activities subsectors.
The civil engineering 71 Chapter 2 2024.indd 71 06/10/2023 5:48 PM economic outlook 2024chapter 2 macroeconomic outlook growth in line with vibrant economic activities.

Domestic demand subsector rebounded, supported by the acceleration of ongoing infrastructure and utilities projects, which include East Coast Rail Link (ECRL) and Large Scale Solar 4 projects.
The non-residential buildings and residential buildings subsectors also registered positive The sector is forecast to expand by 5.9% in the second half of the year supported by growth in all subsectors.

The residential buildings subsector is anticipated to remain encouraging on the back of Government’s initiatives such as i-MILIKI and Housing Credit Guarantee Scheme in assisting first-time home buyers, spurring demand for home ownership.
Similarly, the non-residential buildings subsector is envisaged to increase, particularly with the realisation of approved private investments.

The continuous implementation of strategic infrastructure and utilities projects will further support the civil engineering subsector.

For the TABLE 2.5.
Gross Domestic Product by Aggregate Demand, 2022 – 2024 (at constant 2015 prices) SHARE (%) 20232 CHANGE (%) 20232 20243 2022 94.0 76.6 61.2 15.4 17.4 12.9 4.6 5.3 67.3 62.0 100.0 9.2 10.3 11.2 7.2 4.7 4.5 5.3 -1.0 14.5 4.9 5.3 5.6 4.3 2.8 1.0 8.2 1.1 -6.2 5.3 5.6 5.7 5.4 4.1 2.6 8.3 5.5 4.1 15.9 3.9 -6.8 8.7 ∼ 4.04 4.0 – 5.0 Private expenditure Consumption Investment Public expenditure Consumption Investment External sector1 Exports Imports GDP 1 Goods and non-factor services 2 Estimate 3 Forecast 4 Approximate Note: Total may not add up due to rounding and excluding change in stocks component Source: Department of Statistics and Ministry of Finance, Malaysia year, performance of the sector is expected to is attributable to the lagged effect from remain steady and grow by 6.3%.
the increased Overnight Policy Rate (OPR), Domestic Demand dissipating effect from the Employees Provident Fund special withdrawal and lower corporate earnings of the export-oriented industries.
Domestic activity remains the main driver of Nonetheless, private spending is expected growth to remain resilient supported by continued improvement in the labour market, easing of Domestic demand continues to drive inflationary pressures, and provision of cash growth in an environment of increasing assistance by the Government such as the external uncertainties.
In the first half of special appreciation aid for civil servants and 2023, domestic demand registered a growth retirees as well as e-wallet credit for youths, of 4.5% contributed by strong private and students and Malaysians earning annual public expenditures.

Domestic demand is expected to expand by 4.9% for the whole wages of RM100,000 and below.

The growing trend of digital lifestyle which corresponded year, contributing 4.5 percentage point to GDP with a higher e-commerce income and the growth.
Propelled by both consumption and implementation of Payung Rahmah initiative investment spending, private and public sector are also expected to provide additional boost expenditures are expected to expand by 5.3% in consumer spending.

and 2.8%, respectively, in 2023.


Private consumption, which recorded a 4.9% in the first half of the year, is projected growth of 5.1% in the first half of 2023, is to grow by 4.3% in 2023 mainly supported expected to grow by 5.6% for the whole by new and ongoing projects such as the year.
The lower growth as compared to 2022 construction of data centre facilities, as well Private investment, which expanded by 72 Chapter 2 2024.indd 72 06/10/2023 5:48 PM economic outlook 2024chapter 2 macroeconomic outlook as commercial and industrial buildings.

This is The growth of GNI at current prices is also backed by continuous implementations of estimated at 4.1% in 2023, in line with measures under the Budget 2023.

In addition, the moderating economic performance.


new policies guided by the Ekonomi MADANI Meanwhile, the gross national savings (GNS) framework, which include NETR and NIMP and total investment are anticipated to 2030, are expected to accelerate investment record 25.4% and 22% of GNI, respectively.

activity in uplifting Malaysia as a preferred The savings-investment gap is expected to investment destination.
Furthermore, the register a surplus of RM62 billion or 3.4% of realisation of approved investments by the GNI, providing sufficient liquidity to finance Malaysian Investment Development Authority domestic economic activities.

(MIDA) is expected to have a positive spill over impact on private investment in the near term.

Public consumption registered a marginal growth of 0.8% in the first half of 2023 and is anticipated to record 1% for the whole year, supported by continued spending on emoluments.
This is aligned with the continuous efforts by the Government to rationalise and optimise expenditure while upholding the quality of public service delivery.

Furthermore, the Government continues to enhance value for money in the procurement of supplies and services, reflecting prudent spending.

Public investment registered 6.7% growth in the first half of 2023, mainly driven by public corporations’ higher capital outlays.
Overall, public investment is expected to expand by 8.2% in 2023, supported by capital expenditure by public corporations and acceleration of the Federal Government development expenditure (DE).

Capital spending in the transport segment is projected to continuously expand the segment’s operational capacity and improve service quality.

This includes spending on the ongoing Pan Borneo Highway and ECRL.

FIGURE 2.4.
Savings – Investment Gap (% of GNI) % 30 25 20 15 2020 2021 2022 20231 20242 GROSS NATIONAL SAVINGS TOTAL INVESTMENT3 SAVINGS-INVESTMENT GAP (RIGHT SCALE) 1 Estimate 2 Forecast 3 Including change in stocks Source: Department of Statistics and Ministry of Finance, Malaysia % 15 10 5 0 73 Chapter 2 2024.indd 73 06/10/2023 5:49 PM economic outlook 2024chapter 2 macroeconomic outlook feature article 2.1 Towards an Investment-Driven Economy for a Sustainable Growth in Malaysia Introduction Gross fixed capital formation1 (GFCF), commonly referred to as investment, is one of the factors that contributes to Malaysia’s economic growth.
Historically, the average real GDP growth was recorded at 9.2%, while the share of GFCF to GDP was around 40% during the period of 1991 – 1997.

However, after the Asian Financial Crisis (AFC) in 1997 – 1998, Malaysia experienced a lower growth trajectory.

The average real GDP growth registered 4.3% in 1998 – 2022 with a lower share of GFCF to GDP of around 23%.
To revitalise the economy, the Government introduced the Ekonomi MADANI framework in July 2023, which outlines among others, efforts to attract quality investment, with the aim to accelerate economic growth and improve the quality of life of the rakyat.

In this regard, it is imperative to highlight the economic and investment trends in Malaysia and the driving policies aimed at attracting more high-value investments that will propel the nation’s sustainable growth.
Malaysia’s Economic and Investment Trends The nation has successfully undergone a structural transformation, transitioning from an agriculture- and commodity-based economy to one that is driven by the services and manufacturing sectors.

The development of the economy was mainly guided by long-term development policies namely the New Economic Policy (1971 – 1990) and the Vision 2020 (1991 – 2020).

However, Malaysia was not spared from global economic crises.
The AFC caused the economy to contract by 7.4% in 1998.

In 2020, the global economy was hit by the unprecedented COVID-19 pandemic.

The imposition of lockdowns worldwide including Malaysia to contain the pandemic has resulted in slower global economic and trade activities.

Consequently, Malaysia’s economy contracted by 5.5% in 2020.

Post-pandemic, the Government continues to prioritise on measures to protect lives, restore livelihoods and rebuild businesses.
The nation had gradually recovered where real GDP grew by 3.3% in 2021 and expanded further to 8.7% in 2022.

The growth was the fastest since 2000, mainly attributed to the robust private consumption which recorded a double-digit growth of 11.2%, more than the average of 7.5% during the period of 1991 – 1997.

Similarly, the share of private consumption to GDP also increased to 60.2% in 2022 as compared with an average of 48.3% during the same period as shown in Figure 2.1.1.
This indicates the economy is currently dependent on private consumption-driven growth.

On the contrary, the GFCF growth moderated to 6.8% in 2022 as compared with an average of 15.4% in the 1991 – 1997 period.

The share of GFCF to GDP was also lower at around 20% in 2022 as compared with an average of 40.2% during the same period.
1 Gross fixed capital formation (GFCF) is also known as investment in fixed assets that used repeatedly in the process of production for more than one year (Department of Statistics, Malaysia, 2023).

74 Chapter 2 2024.indd 74 06/10/2023 5:49 PM economic outlook 2024chapter 2 macroeconomic outlook FIGURE 2.1.1.
Gross Domestic Product, Gross Fixed Capital Formation and Private Consumption in Malaysia at Constant Prices % to GDP 100 1991 – 1997 Private Consumption: 48.3% GFCF: 40.2% GDP: 9.2% 2022 Private Consumption: 60.2% GFCF: 19.7% GDP: 8.7% % change 12 80 60 40 20 PRIVATE CONSUMPTION GROSS FIXED CAPITAL FORMATION (GFCF) GROSS DOMESTIC PRODUCT (GDP) (RIGHT SCALE) Source: Department of Statistics, Malaysia and World Development Indicators 10 8 6 4 2 0 -2 -4 -6 -8 Prior to the AFC, the significant increase in the share of investment to GDP coupled with higher exports performance, particularly E&E products, had contributed to the country’s robust economic growth.
The increase was in line with supportive Government policies that primarily revolved around substantial infrastructures and incentives to attract foreign direct investment (FDI) and accelerate industrialisation (Yusuf and Nabeshima, 2009).

Various measures were introduced to incentivise domestic manufacturers to participate in the export market.

Additionally, free trade zones were established to attract foreign investment and export-intensive industries (Khalafalla and Webb, 2001).
The E&E exports accounted for 57.6% of the total gross exports in 1999 as shown in Figure 2.1.2.

However, since 2000, the downturn of the global electronic industry and the rise of China’s economy have triggered changes in Malaysia’s manufactured exports components (Abidin and Loke, 2008).

Furthermore, the country also faced challenges in attracting FDI due to increased competition from neighbouring countries offering lower labour costs.
Consequently, Malaysia’s exports of E&E products recorded a lower share of 38.3% in 2022.

The exports of non-E&E products showed an increasing trend and recorded a share of 46% in 2022 as compared with 27.1% in 1999.

This trend is in line with higher value-added downstream manufacturing activities, particularly in petroleum products; and chemicals and chemical products.
However, as an open economy, a decrease in external demand affected Malaysia’s economy to record a moderate growth of 2.9% in the second quarter of 2023 as compared with 5.6% in the first quarter of 2023, mainly due to lower non-E&E exports.

Moving forward, the nation needs to accelerate investments in higher value-added manufacturing activities, and diversify the nation’s export products supported by greater international trade facilitations to expand market access.
Chapter 2 2024.indd 75 06/10/2023 5:49 PM 75 economic outlook 2024chapter 2 macroeconomic outlook FIGURE 2.1.2.
Malaysia’s Gross Exports (% share) 0.9% 14.5% 27.1% 1999 0.6% 22.8% 37.6% 2010 57.6% 0.5% 15.4% 39.1% COMMODITY-BASED E&E OF MANUFACTURED GOODS NON-E&E OF MANUFACTURED GOODS OTHERS 46% 2022 38.3% Note: Total may not add up due to rounding Source: Malaysia External Trade Development Corporation In terms of GFCF by type of assets, investment in structure2 continued to record a significant share, albeit at a declining trend since 2015 while investment in machinery and equipment3 (M&E) showed a growing trend as reflected in Figure 2.1.3.
The increasing composition of M&E investment signifies greater adoption of new technology and digitalisation along the production process.

This is in tandem with the provision of Government grants and incentives to promote the adoption of automation, Industry 4.0 technologies and digitalisation among businesses.

FIGURE 2.1.3.
Gross Fixed Capital Formation by Type of Assets in Malaysia at Constant Prices RM billion OTHER ASSETS MACHINERY AND EQUIPMENT STRUCTURE Source: Department of Statistics, Malaysia 2 Investment in structure comprises of residential buildings; non-residential buildings; other construction; and floating structure for oil and gas activities.
3 Investment in machinery and equipment comprises of transport equipment; other machinery & equipment; ICT equipment; and computer software & database.

76 Chapter 2 2024.indd 76 06/10/2023 5:49 PM economic outlook 2024chapter 2 macroeconomic outlook The COVID-19 pandemic had an adverse impact on the GFCF in Malaysia, resulting in a decline for two consecutive years in 2020 and 2021.

Although investment has rebounded in 2022, it has yet to reach its pre-pandemic level.
The pandemic has heightened the need for digitalisation to ensure the continuity of economic activities.

In recognising this, the Government launched the Malaysia Digital Economy Blueprint in 2021 outlining strategies to transform the country into a digitally-driven economy by 2030.

According to the report on Usage of ICT and E-Commerce by Establishment, 93.8% of establishments used computers and electronic devices in 2021 as compared with 86.2% in 2019.
Meanwhile, internet usage increased to 90.6% as compared with 85.2% in 2019.

Furthermore, income via e-commerce transactions in Malaysia also grew by 23.9% to RM1,037.2 billion as compared with RM675.4 billion in 2019, mainly contributed by the manufacturing and services sectors at RM553.8 billion and RM473 billion, respectively.

Private investment, primarily concentrated in the services and manufacturing sectors, plays a catalytic role in generating economic growth in Malaysia.
In 2022, private investment share to GFCF increased to around 78% as compared with 65.1% in 2015 as depicted in Figure 2.1.4, reflecting a private sector-led investment in Malaysia.

The Government has taken several initiatives to further boost private investment, which include the announcement of the National Investment Aspirations (NIA) in April 2021 as a foundation for comprehensive reforms in investment policies.
Three main objectives of the NIA are to catalyse investments to boost Malaysia’s economic recovery post- pandemic; to secure Malaysia’s global position in a post-COVID era; and to deliver on the promise of inclusive development.

Furthermore, the New Investment Policy (NIP), which was launched in October 2022, aims at strengthening Malaysia’s foundations for developing new and existing high- value growth ecosystems, and ensuring Malaysia remains as a competitive destination for high- value investments.
FIGURE 2.1.4.
Gross Fixed Capital Formation by Sectors in Malaysia at Constant Prices RM billion PUBLIC SECTOR PRIVATE SECTOR Source: Department of Statistics, Malaysia Chapter 2 2024.indd 77 06/10/2023 5:49 PM 77 economic outlook 2024chapter 2 macroeconomic outlook During the period 2012 – 2020, domestic direct investment (DDI) contributed significantly to the total approved investment, accounting for 69.6% or RM1,263.8 billion as shown in Figure 2.1.5.
However, post-pandemic, FDI has become the primary driver of the total approved investment.

Nevertheless, the Government remains committed to promote DDI by fostering a robust domestic industrial ecosystem and integrating local companies into the supply chain alongside multinational corporations.

The Government also continues to provide funding to assist small and medium enterprises (SMEs) in adopting Industry 4.0 technologies.
The Government has also issued a guideline requiring federal statutory bodies and subsidiary companies to prioritise domestic investments to further boost the local equity market and strengthen the value of the ringgit.

Furthermore, the Ekonomi MADANI framework emphasises on cooperation and strategic engagement by government-linked investment companies and government-linked companies to accelerate domestic investment and support the development of local vendors.

FIGURE 2.1.5.
Approved Investment in Malaysia RM billion FOREIGN DIRECT INVESTMENT DOMESTIC DIRECT INVESTMENT Source: Malaysian Investment Development Authority Notwithstanding the ongoing economic recovery post-pandemic, several challenges persist in balancing between the private consumption and investment that necessitate a renewed focus on investment-related policies.
Relying excessively on private consumption to drive economic growth is not sustainable, particularly when it is driven by fiscal injection and household savings.

An empirical analysis involving 40 countries by Fukuda and Watanabe (2012) found that consumption is the main driver of economic growth in developing economies.

Meanwhile, advanced economies rely on investment to fuel growth.
Therefore, Malaysia needs to prioritise investment in innovative and advanced technology to achieve higher productivity and sustainable economic growth.

Therefore, the revival of private investment and FDI is crucial in driving towards higher productivity, hence allowing the country to break out of the middle-income trap (Menon, 2012).

This is in line with the finding by Lean and Tan (2011) that FDI and economic growth are positively related.
Inflows of FDI can encourage technological adoption and increase the production capacity of economic sectors by forming supply chain linkages with local firms, including micro, small, and medium enterprises (MSMEs).

This, in turn, can lead to higher domestic investment and economic growth.
78 Chapter 2 2024.indd 78 06/10/2023 5:49 PM economic outlook 2024chapter 2 macroeconomic outlook Based on an internal estimation by the Ministry of Finance, Malaysia using a Structural Vector Error Correction Model, private investment is an important factor in stimulating economic growth in the short run.

Therefore, the Government has implemented a responsive fiscal and accommodative monetary policy to boost private investment.
Meanwhile, in the long term, the Government is focusing on structural reform strategies to strengthen economic growth, which include fostering industries with high-growth value; enhancing technological advancement through innovation; expediting digitalisation; and developing a future-ready workforce.

These strategies will further promote sustainable private investment for the future.
Government Policies to Attract Higher Investment for Sustainable Growth Moving forward, the Ekonomi MADANI framework will serve as a foundation in revitalising the economy to ensure the accumulated wealth is benefitted equitably among the rakyat.
In order to become a globally competitive investment destination, efforts will be intensified to strengthen investment promotion, enhance incentive measures to attract high-quality investments, upgrade existing infrastructure and develop human capital to meet investor needs.
To date, several Government policies have been introduced to complement the framework such as the National Energy Transition Roadmap (NETR), New Industrial Master Plan 2030 (NIMP 2030) and Mid-Term Review of the Twelfth Malaysia Plan (MTR of the Twelfth Plan).

National Energy Transition Roadmap The NETR will guide investments in six energy transition levers which include energy efficiency, renewable energy, hydrogen, bioenergy, green mobility as well as carbon capture, utilisation and storage (CCUS).
Therefore, the whole-of-nation approach is needed to ensure the successful implementation of this initiative.

New Industrial Master Plan 2030 The NIMP 2030 encompasses six goals, namely increasing economic complexity; creating high-value job opportunities; extending domestic linkages; developing new and existing clusters; improving inclusivity; and enhancing ESG practices.
The NIMP 2030 also identified several enablers which include mobilising the financing ecosystem; fostering talent development and attracting talents; developing a world-class investor ecosystem to facilitate ease of doing business; and introducing a whole-of-nation governance framework.

To achieve the six goals, the NIMP 2030 will require an estimated total investment of RM95 billion during the seven-year implementation period led by the private sector.
At the same time, the Government will also provide allocations to fund the NIMP 2030 action plans through the NIMP Industrial Development Fund and the NIMP Strategic Co-Investment Fund.

Mid-Term Review of the Twelfth Malaysia Plan The MTR of the Twelfth Plan highlights 17 Big Bold catalytic strategies to reform the socioeconomic development towards achieving the aspiration of the Ekonomi MADANI framework.
In this regard, focus will be given on accelerating the development of high growth high value (HGHV) industries, attracting quality investment in technology-based industries, as well as enhancing technological adoption and digitalisation.

The private sector will also be encouraged to intensify green 79 Chapter 2 2024.indd 79 06/10/2023 5:49 PM economic outlook 2024chapter 2 macroeconomic outlook investment in business operations and premises.
Measures will also be undertaken to remove the barriers which hinder the expansion of MSMEs by facilitating their integration into domestic and global supply chains.

The labour market reforms will be expedited through upskilling and reskilling programmes to produce industry-ready talent and retaining existing workforce.
Conclusion The rapid expansion of investment in Malaysia has extensively contributed to the changing structure of the economy from an agriculture- and commodity-based to an economy that is driven by the services and manufacturing sectors.

Post-AFC, the nation experienced lower growth trajectory and lower investment.

Without swift and effective reforms in investment-related policies, Malaysia is far from achieving its aspiration to be the top 30 largest economies.
Therefore, strategies and measures under the NETR, NIMP 2030 and MTR of the Twelfth Plan as guided by the Ekonomi MADANI framework will propel quality investments in high-value-added industries, especially in the energy transition, digital and high-technology industries, ultimately creating more high-income employment opportunities for the rakyat towards sustainable economic growth.

Income FIGURE 2.5.
Gross Domestic Product by Income Components, 2021 – 2024 RM billion at current prices 2,000 0.6 14.2 2.7 15.2 52.8 49.7 2.3 17.4 45.2 3.1 15.5 Gross Operating Surplus 48.3 1,500 1,000 500 0 35.1 32.4 32.4 33.1 2021 2022 20231 20242 COMPENSATION OF EMPLOYEES OPERATING SURPLUS MIXED-INCOME TAXES LESS SUBSIDIES 1 Estimate 2 Forecast Source: Department of Statistics and Ministry of Finance, Malaysia Attaining balanced income sharing remains challenging Vibrant business and economic activities have contributed to a substantial creation of new jobs and income opportunities in the economy.
As a result, the labour income improved by 6.5% to RM579.7 billion in 2022.

Nevertheless, the share of compensation of employees (CE) to GDP continued to exhibit a downward trend to 32.4% as the nominal GDP recorded a faster growth of 15.7%.

Though a similar trend was also observed in other countries, the decreasing trend implies that workers were still not benefitting sufficiently from the economic advancement through higher wages.
This may continue to post a challenge in attaining the target of 40% by 2025.

The share of CE is expected to sustain at 32.4% in 2023, an increase by 3.5% to RM599.9 billion in line with the expectation of continuous encouraging growth prospects.

The share will be attributed mainly to income from the services (61.7%) and manufacturing (24.4%) sectors, particularly in electrical, electronic and optical products and tourism-related industries.
80 Chapter 2 2024.indd 80 06/10/2023 5:49 PM economic outlook 2024chapter 2 macroeconomic outlook TABLE 2.6.
Gross Domestic Product by Income in Selected Countries, 2020 – 2022 COMPENSATION OF EMPLOYEES GROSS OPERATING SURPLUS TAXES LESS SUBSIDIES SHARE OF GDP (%) Malaysia Philippines Singapore Republic of Korea Australia Netherlands United Kingdom Germany United States Source: Department of Statistics, Malaysia Meanwhile, gross operating surplus (GOS) continued to be the major income component with its share to GDP amounting to 67%, following a significant increase of 23.9% in 2022.
Capital owners, particularly in the mining and quarrying sector, continued to reap a 35.1% double-digit profit growth from business enhancement attributed to higher commodity prices.

On the other hand, the mixed-income for the self-employed group persisted in a contraction trend at 5.3% as this group is still facing challenges to secure adequate income amid the transition phase towards endemicity.
Nonetheless, mixed-income is expected to expand by 10.4% in 2023 as vigorous economic activities and increasing domestic demand will provide more employment and income prospects for the self-employed group.

Overall, the share of GOS to GDP is projected to record 64.9% in 2023 with most of the profit will be owned by capital owners.

expenditure was allocated for fuel subsidy to mitigate the rising cost of products and services.
Nevertheless, income from taxes on production and imports is expected to improve in 2023, following a lower expenditure on subsidies and incentives.

Hence, the overall share of net taxes on production and imports is expected to improve to 2.7% of GDP.

External Sector Lacklustre performance dampened the outlook Trade Performance Total trade is expected to decline by 7.3% to RM2,634.9 billion in 2023 attributed to slower external demand from major trading partners as a result of moderating global trade.
Similarly, trade surplus is estimated to decrease by 12.5% to RM224.2 billion.

Net taxes on production and imports continued to decrease and contributed only 0.6% to GDP in 2022, the lowest share ever recorded in almost two decades, due to a large contraction of 69.2% recorded for net taxes.

The contraction was attributed to a surge of 134.4% in expenditure for subsidies and incentives in relation to income from taxes which merely increased by 23.8%.
Most of the Gross exports are projected to contract by 7.8% in 2023 due to sluggish external demand from major trading partners owing to slower- than-expected economic recovery, particularly in China as well as moderate commodity prices.
Exports of manufactured goods are estimated to decline by 5.3% dragged by a 10.4% decrease in non-E&E products, which more than offset the marginal increase in 81 Chapter 2 2024.indd 81 06/10/2023 5:49 PM economic outlook 2024chapter 2 macroeconomic outlook exports of E&E products.

Exports of non-E&E products, particularly petroleum products and palm oil-based manufactured products are expected to shrink following weakening external demand and moderate commodity prices.
Meanwhile, the marginal growth of 0.8% in E&E products is attributed to softening external demand for global electronics manufacturing components due to weakening economic conditions in China, the EU and the US.

The E&E components with highest share include semiconductor, telecommunication equipment parts, and automatic data processing equipment.
Likewise, exports of agriculture goods are estimated to contract by 24.8%, weighed down by weak demand for palm oil and palm oil based agriculture products as well as natural rubber.

Reduction in export earnings of palm oil is anticipated at 30.4% resulting from lower demand by major trading countries, particularly from China, India, the Netherlands, the Philippines and Turkiye.
Furthermore, exports of mining goods are projected to contract by 18.5%, attributed to lower global demand for LNG and crude petroleum by 21.8% and 16.2%, respectively.

TABLE 2.7.
External Trade, 2022 – 2024 RM MILLION 2022 20231 20242 2022 CHANGE (%) 20231 20242 Total trade Gross exports of which: Manufactured Agriculture Mining Gross imports of which: Capital goods Intermediate goods Consumption goods 2,843,821 2,634,886 2,766,393 1,550,009 1,429,547 1,501,859 1,304,668 1,235,167 1,303,202 120,903 117,346 90,876 95,609 92,405 98,343 1,293,811 1,205,339 1,264,533 120,231 113,335 119,079 706,551 636,558 669,696 104,017 96,462 100,388 Trade balance 256,198 224,208 237,326 27.6 24.9 22.1 23.3 68.2 31.0 15.8 29.5 24.0 1.0 -7.3 -7.8 -5.3 -24.8 -18.5 -6.8 -5.7 -9.9 -7.3 -12.5 5.0 5.1 5.5 1.7 2.9 4.9 5.1 5.2 4.1 5.9 1 Estimate 2 Forecast Note: Total may not add up due to rounding Source: Department of Statistics, Malaysia External Trade Development Corporation and Ministry of Finance, Malaysia TABLE 2.8.
Gross Exports, January – August 2022 and 2023 RM MILLION CHANGE (%) SHARE (%) 2022 2023 2022 2022 2022 2023 Manufactured Agriculture Mining Others1 850,880 800,624 81,941 75,147 4,514 60,810 68,272 5,510 Gross exports 1,012,482 935,217 26.4 41.0 70.7 49.0 30.0 -5.9 -25.8 -9.1 22.1 -7.6 84.0 8.1 7.4 0.4 85.6 6.5 7.3 0.6 100.0 100.0 1 Including gold scrap and waste; worn clothing; and special transaction not classified Note: Total may not add up due to rounding Source: Department of Statistics, Malaysia and Malaysia External Trade Development Corporation 82 Chapter 2 2024.indd 82 06/10/2023 5:49 PM economic outlook 2024chapter 2 macroeconomic outlook TABLE 2.9.
Exports of Manufactured Goods, January – August 2022 and 2023 E&E Non-E&E Petroleum products Chemicals & chemical products Manufactures of metal Machinery, equipment & parts Optical & scientific equipment Palm oil-based manufactured products Rubber products Processed food Iron & steel products Transport equipment Textiles, apparels & footwear Manufactures of plastics Wood products Non-metallic mineral products Jewellery Paper & pulp products Beverages & tobacco Other manufactures Exports of manufactured goods RM MILLION CHANGE (%) SHARE (%) -58.3 18.3 34.0 9.7 16.3 12.5 22.9 15.7 34.1 16.7 8.6 29.3 26.4 0.1 -10.8 -5.2 -11.5 -16.1 -8.9 -1.7 -28.0 -33.6 4.0 -13.3 0.9 -10.4 -10.1 -25.5 3.1 6.5 14.4 19.2 -18.9 - Note: Total may not add up due to rounding Source: Department of Statistics, Malaysia and Malaysia External Trade Development Corporation FIGURE 2.6.
Top 10 Trading Partners, January – August 2023 (% share) Exports Imports 15.9% RM935.2 billion 13.2% 11.2% 28.8% 3.3% 3.5% 3.6% 4.0% 4.2% 6.1% 6.2% 26.3% 21.1% 3.0% 3.7% 4.4% RM782.3 billion 11.8% 7.1% 4.5% 5.1% 6.0% 7.0% SINGAPORE CHINA US HONG KONG JAPAN THAILAND REPUBLIC OF KOREA AUSTRALIA INDONESIA VIET NAM REST OF THE WORLD CHINA SINGAPORE US TAIWAN JAPAN INDONESIA THAILAND REPUBLIC OF KOREA SAUDI ARABIA AUSTRALIA REST OF THE WORLD Note: Total may not add up due to rounding Source: Department of Statistics, Malaysia and Malaysia External Trade Development Corporation 83 Chapter 2 2024.indd 83 06/10/2023 5:49 PM economic outlook 2024chapter 2 macroeconomic outlook Gross imports are projected to slip by 6.8% slowdown in manufactured exports.
Similarly, in 2023 dragged down by major categories, capital goods and consumption goods are namely intermediate, capital and consumption estimated to contract by 5.7% and 7.3%, goods, partly due to the depreciation of respectively.

Of the total imports, capital goods ringgit.

Imports of intermediate goods, which form a share of 9.4% while consumption goods constitute the largest share of 52.8%, are constitute 8%.

expected to decrease by 9.9% as a result of a TABLE 2.10.
Gross Imports by End Use, January – August 2022 and 2023 RM MILLION CHANGE (%) SHARE (%) 2022 2023 2022 2023 2022 2023 Capital goods 77,275 78,169 15.7 Capital good (except transport equipment) 68,861 70,586 9.2 1.2 2.5 9.0 8.0 Transport equipment (industrial) 8,414 7,583 125.7 -9.9 -1.0 10.0 9.0 1.0 Intermediate goods 473,467 399,416 35.9 -15.6 55.3 51.1 Food and beverages, primary and processed, mainly for industries 23,529 20,142 33.4 -14.4 2.7 Fuel and lubricants, primary, processed and others 72,698 68,452 129.9 -5.8 8.5 Industrial supplies, primary, processed and n.e.s.1 213,359 183,184 20.9 -14.1 24.9 Parts and accessories of capital goods and transport equipment 163,881 127,638 33.5 -22.1 19.1 Consumption goods Food and beverages, primary and processed, mainly for household 67,897 67,021 25.0 29,778 31,031 24.8 -1.3 4.2 Transport equipment (non-industrial) 1,160 999 5.8 - -5.3 -3.5 -1.6 -8.9 1.0 210,964 210,650 47.3 -0.1 24.6 26.9 856,366 782,293 36.3 -8.6 100.0 100.0 Other consumer goods Durables Semi-durables Non-durables Others Re-exports Gross imports 1 Not elsewhere stated Note: Total may not add up due to rounding Source: Department of Statistics, Malaysia 84 Chapter 2 2024.indd 84 06/10/2023 5:49 PM economic outlook 2024chapter 2 macroeconomic outlook Balance of Payments tourist arrivals is anticipated to contribute to a smaller deficit of RM28.7 billion in the The current account surplus of the balance transport account.
On the other hand, other of payments widened to RM13.4 billion or services account is expected to register a 1.6% of GNI in the first half of 2023.

This is wider deficit of RM27.3 billion following attributed to a smaller deficit in the services increasing payments for construction, and income accounts while the goods account maintenance and repair services as well as continuing to register a surplus albeit financial services.

narrowing.
narrowing.

The performance is expected to continue in the second half of the year The primary income account is projected to with the current account surplus is forecast register a narrower deficit of RM47.1 billion in to expand to RM48.6 billion or 5.2% of GNI 2023 owing to a smaller deficit in investment following smaller deficit in the services and income account albeit higher deficit in income accounts albeit narrowing surplus in compensation of employees.

The narrowing the goods account.


Overall, a wider current deficit in investment income account to RM37.8 account surplus of RM62 billion or 3.4% of GNI billion is attributed to higher investment is expected to be recorded in 2023. income earnings, mainly other investment account albeit lower investment income The goods account is forecast to register payments, particularly in the direct investment a lower surplus of RM170.2 billion in 2023, account.
Correspondingly, compensation of weighed down by decreasing exports of employees is anticipated to record a wider manufactured, agriculture and mining goods.

deficit of RM9.3 billion attributed to a gradual Meanwhile, the services account is expected increase in wages.
This is also partly due to an to record a smaller deficit of RM41.5 billion, increase in the number of foreign professionals following a turnaround in the travel account in Malaysia following ongoing infrastructure and narrowing deficit in the transport account and utilities projects.

albeit wider deficit in other services accounts.


The gradual return to normalcy in many Earnings in the secondary income account for nations post COVID-19 pandemic, including the the whole year are anticipated to increase to reopening of China’s borders, is projected to RM35.3 billion following higher remittances have a positive impact on tourism in Malaysia.

by Malaysians working abroad.


Nonetheless, Consequently, the travel account is expected payments in the secondary income account to register a surplus of RM14.5 billion.

The are expected to increase to RM54.9 billion, positive impact in the air travel industry will leading to a higher deficit of RM19.6 billion.

be mainly contributed by the increase in flight The increase in payments is due to larger frequencies and resumption of direct flight operations.
These, in turn, will contribute remittances by foreign workers from Bangladesh, India, Indonesia, Nepal and the to domestic companies’ higher earnings Philippines following continuous expansion in following competitive air fares and freight economic activities and the upward revision of charges as well as fees generated from airport minimum wage.

and port activities.

In addition, the surge in Chapter 2 2024.indd 85 06/10/2023 5:49 PM 85 economic outlook 2024chapter 2 macroeconomic outlook TABLE 2.11.
Current Account of the Balance of Payments, 2022 – 2024 (RM million) Balance on goods and services Goods Services Transport Travel Other services Primary income 2022 20231 20242 RECEIPTS PAYMENTS NET RECEIPTS PAYMENTS NET RECEIPTS PAYMENTS NET 1,378,452 1,248,820 129,632 1,272,424 1,143,757 128,667 1,345,773 1,206,785 138,988 1,238,180 1,052,151 186,029 1,078,138 907,968 170,171 1,134,967 960,092 174,876 140,272 196,670 -56,397 194,285 235,789 -41,504 210,806 246,693 -35,888 25,604 59,649 -34,045 32,298 60,983 -28,685 34,220 62,129 -27,908 28,370 29,526 -1,156 63,989 49,539 14,450 76,550 53,815 22,735 86,299 107,495 -21,196 97,998 125,268 -27,269 100,035 130,750 -30,715 88,704 148,118 -59,414 93,005 140,124 -47,119 97,067 155,557 -58,490 Compensation of employees 7,124 14,359 -7,235 8,306 17,642 -9,336 8,736 18,968 -10,232 Investment income 81,580 133,759 -52,179 84,699 122,482 -37,783 88,331 136,589 -48,258 Secondary income 22,765 37,885 -15,120 35,334 54,909 -19,575 37,546 55,804 -18,258 Balance on current account 1,489,921 1,434,823 55,098 1,400,763 1,338,791 61,972 1,480,386 1,418,146 62,240 % of GNI 3.2 3.4 3.2 1 Estimate 2 Forecast Note: Total may not add up due to rounding Source: Department of Statistics and Ministry of Finance, Malaysia In the first half of 2023, the financial account registered a net outflow of RM13.9 billion, resulting from a significant drop of net inflows in direct investment and other investment accounts, coupled with wider net outflows in the portfolio investment and financial derivatives accounts.
FDI registered a net inflow of RM15.1 billion, channelled mainly to the financial and insurance/takaful activities; information and communication sector; as well as professional, scientific and technical activities.

Net outflows of direct investment abroad by Malaysian companies narrowed to RM9.1 billion.

The outflows were mainly directed into financial and insurance/takaful activities; electricity, gas, steam and air conditioning supply; as well as transportation and storage sectors.
86 FIGURE 2.7. International Reserves RM billion 600 Months/Times 12 500 400 300 200 100 0 J A J O J A J O J A J 2021 2022 2023 10 8 6 4 2 0 INTERNATIONAL RESERVES MONTHS OF IMPORTS OF GOODS AND SERVICES TOTAL SHORT-TERM EXTERNAL DEBT RIGHT SCALE As at 30 August 2023, Malaysia's international reserves amounted to RM525.5 billion or USD112.2 billion adequate to finance 5.2 months of imports of goods and services and 1.0 times of the total short-term external debt (end-December 2022: RM503.3 billion; USD114.6 billion; 5.2 months; 1.0 times) Source: Bank Negara Malaysia Chapter 2 2024.indd 86 06/10/2023 5:49 PM economic outlook 2024chapter 2 macroeconomic outlook feature article 2.2 Navigating High-Impact Economic Growth through Direct Investment Introduction Direct investment has a pivotal role in facilitating economic growth as it boosts job creation and productivity as well as improves competitiveness.
It provides both direct and indirect contributions to economic activity in terms of GDP.

The objective of direct investment is to establish a lasting interest that implies a long-term relationship between the direct investor1 and the direct investment enterprise2 in another economy.

Direct investment is a key element in international economic integration and an important channel for the transfer of technology.
According to directional principle basis, direct investment is shown as either inward or outward in the host economies that refer to the countries in which they are resident, as depicted in Figure 2.2.1.

Inward direct investment (hereafter known as FDI) encompasses all liabilities and assets between resident enterprises and the foreign investors.

FDI is commonly used to describe investment flows into a specific country and highlighting the inflow of capital and expertise from foreign investors.
FIGURE 2.2.1.
Inward and Outward Direct Investment MALAYSIA MALAYSIA (Home (Host Country) Country) Inward Direct Investment (also known as Foreign Direct Investment, FDI) COUNTRY X (Home Country) Direct Investment Enterprise Direct Investor Direct Investor Direct Investment Enterprise MALAYSIA MALAYSIA (Home (Home Country) Country) Outward Direct Investment (also known as Direct Investment Abroad, DIA) COUNTRY X (Host Country) Source: OECD Benchmark Definition of Foreign Direct Investment, Fourth Edition, 2008, Balance of Payments and International Investment Position Manual Sixth Edition (BPM6), 2009 and Ministry of Finance, Malaysia 1 A direct investor is an entity (an institutional unit) resident in one economy that has acquired, either directly or indirectly, at least 10% of the voting power of a corporation (enterprise), or equivalent for an unincorporated enterprise, resident in another economy.
2 A direct investment enterprise is an enterprise resident in one economy and in which an investor resident in another economy owns, either directly or indirectly, 10% or more of its voting power if it is incorporated or the equivalent for an unincorporated enterprise.
87 Chapter 2 2024.indd 87 06/10/2023 5:49 PM economic outlook 2024chapter 2 macroeconomic outlook Otherwise, outward direct investment, also known as direct investment abroad (DIA), covers assets and liabilities between resident direct investors and direct investment enterprises.

DIA emphasises the outward investment by residents or entities of a country and highlighting their engagement in foreign markets and assets.

The summarised characteristics of FDI and DIA are shown in Figure 2.2.2.
Both FDI and DIA involve cross-border investment activities with different focus and perspective.

FIGURE 2.2.2.
Characteristics of Foreign Direct Investment and Direct Investment Abroad DIRECT INVESTMENT Foreign Direct Investment (FDI) Direct Investment Abroad (DIA) Also referred to as inward direct investment Also known as outward direct investment The value of inward direct investment made by non-resident investors in the reporting economy The value of outward direct investment made by the residents of the reporting economy to external economies Includes liabilities and assets transferred between resident direct investment enterprises and their direct investors Includes assets and liabilities transferred between resident direct investors and their direct investment enterprises It also covers transfers of assets and liabilities between resident and non-resident fellow enterprises, if the ultimate controlling parent is non-resident It also covers transfers of assets and liabilities between resident and non-resident fellow enterprises, if the ultimate controlling parent is resident Source: OECD Benchmark Definition of Foreign Direct Investment, Fourth Edition, 2008, Balance of Payments and International Investment Position Manual Sixth Edition (BPM6), 2009 and Ministry of Finance, Malaysia Malaysia’s Investment at a Glance In accordance with the guidelines provided in the Balance of Payments and International Position Manual by International Monetary Fund (IMF), the transactions for direct investment are recorded in the financial account of the balance of payments.
These entries are then translated into a calculation of the GDP and gross national income (GNI).

The performance of Malaysia’s direct investment recorded net outflows from 2008 to 2015, while from 2016 to 2022, it registered net inflows contributed by higher FDI inflows.
Located in the central region of the ASEAN and on the Asia Pacific Rim, Malaysia remains an attractive destination for investors due to its favourable investment climate, well-developed infrastructure and telecommunications, robust financial and banking services, strong legal framework, skilled labour force as well as diversified market opportunities supported by the 88 Chapter 2 2024.indd 88 06/10/2023 5:49 PM economic outlook 2024chapter 2 macroeconomic outlook 16 ratified free trade agreements (FTAs).
Malaysia maintained its strong position globally, ranking the second-highest in Southeast Asia and 14th out of 171 countries in the DHL Global Connectedness Index (GCI) report in 2023 and 27th in the IMD World Competitiveness 2023.

Regardless of global headwinds following the COVID-19 pandemic, the rankings by various agencies further reinforced Malaysia’s position as a competitive and attractive investment destination.
Notwithstanding, the uncertainty in global outlook, financial sector turmoil, high inflation and lingering geopolitical tensions pose as potential challenges to Malaysia.

The IMF has forecast the global growth to moderate from 3.5% in 2022 to 3% in 2023 and 2024, while the World Bank projected the global growth to decelerate from 3.1% in 2022 to 2.1% in 2023.
The slower-than- expected global growth is affecting the investment landscape holistically as investors become more selective and cautious in business decisions.

Foreign Direct Investment in Malaysia Many developing countries favour FDI over other forms of capital flows attributed to its resilience towards economic uncertainties.

Being a highly open economy, Malaysia is not spared from the impact of challenges arising from various crises.
Nevertheless, FDI in Malaysia has proven to be resilient and continued to record net inflows even during the Global Financial Crisis of 2008 – 2009 and the recent COVID-19 pandemic.

Despite recording negative growth during these crises, Malaysia is still able to record net inflows of RM5.1 billion in 2009 and RM13.3 billion in 2020, as depicted in Figure 2.2.3.

The net inflows of FDI surged more than threefold in 2021 to RM50.4 billion and registered a historic peak of RM74.6 billion in 2022.
The increment was driven by effective policies in placing greater emphasis in promoting FDIs, strong economic recovery and spillover benefit arising from trade diversion.

This is attributed to the relocation of MNCs to circumvent the high tariffs as well as a steady growth of high-quality investment, particularly in the manufacturing sector.

FIGURE 2.2.3.
Performance of Foreign Direct Investment in Malaysia and Malaysia’s Direct Investment Abroad RM billion 80 60 40 20 0 -20 -40 -60 -80 Global Financial Crisis COVID-19 Pandemic 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 FOREIGN DIRECT INVESTMENT IN MALAYSIA MALAYSIA’S DIRECT INVESTMENT ABROAD Source: Bank Negara Malaysia and Department of Statistics, Malaysia 89 Chapter 2 2024.indd 89 06/10/2023 5:49 PM economic outlook 2024chapter 2 macroeconomic outlook FDI can bring many advantages to the host country, particularly in the transfer of advanced technologies, managerial expertise, and best practices from foreign investors.
In addition, FDI provides employment opportunities for the local workforce.

More than 700,000 employment opportunities or 44.7% of total employment in 2000 to 2022, generated through investment projects under MIDA, were sourced from foreign-owned projects.

Of these job creations, about 82% were for locals, mostly in the manufacturing sector (MIDA, 2023).

The transfer of knowledge can elevate local industries’ technological capabilities, thus increasing local companies’ competitiveness on a global scale.
Employees’ skill development will also be enhanced through on-the-job training, professional development opportunities, and exposure to international work practices, provided by foreign companies.

The FDI could also offer access to global distribution networks and contribute to export expansion by utilising local contents and resources as well as producing goods locally to fulfil international demand.

Malaysia has diversified the economy to move up the value chain and reduce dependency on commodities.
On a sectoral basis, the focus of FDI has shifted from commodity-based to manufacturing- and services-based sectors, as depicted in Figure 2.2.4.

In 2010, the bulk of the FDIs were channelled to the manufacturing sector with 56.7%, followed by the services (33.6%) and commodity-based (11%) sectors.
Contribution of the manufacturing and services sectors became more significant in 2022, totalling more than 97% of total FDIs resulting from the strategic change in policy direction towards higher value-added activities and quality investment in these sectors.

The evolution in the manufacturing sector from a conventional industrial production process to an inclusive concept also helped in the expansion.
Greater emphasis is also given to the development of the services sector as the main engine of growth to propel and sustain the economy.

FIGURE 2.2.4.
Performance of Foreign Direct Investment in Malaysia by Sectors (% share) 0.7% 10.6% 55.7% 17.8% 6.4% 33.0% 25.5% 0.2% 1.9% Wholesale & Retail Trade, 13.8% Information & Communication, 12.2% 50.3% 31.5% 66.4% Financial & Insurance/Takaful Activities, 52.5% Other Services, 21.5% 2010 2016 2022 MANUFACTURING SERVICES ACTIVITIES COMMODITY-BASED CONSTRUCTION Source: Bank Negara Malaysia and Department of Statistics, Malaysia In terms of the flow of FDI in Malaysia by continent, East Asian countries, particularly Japan and Hong Kong, have invested the most, constituting about 35% of total net FDI from 2010 to 2022 amounting to RM497 billion.
In 2022, North America contributed the most FDI with a share of 49.8%, followed by East Asia (29.5%) and Southeast Asia (19%), as shown in Figure 2.2.5.

Among the ASEAN peers, Singapore received the highest FDIs of USD1,016 billion for the period of 2010 to 2022, followed by Indonesia (USD239.7 billion), Viet Nam (USD161.5 billion) and Malaysia (USD132.2 billion).

90 Chapter 2 2024.indd 90 06/10/2023 5:49 PM economic outlook 2024chapter 2 macroeconomic outlook FIGURE 2.2.5.
Foreign Direct Investment in Malaysia by Major Block of Countries RM billion 40 35 30 25 20 15 10 5 0 North America East Asia Southeast Asia Latin America 2022 2016 2010 Source: Bank Negara Malaysia and Department of Statistics, Malaysia Although FDIs offer various advantages to the nation, there are still potential risks that requires Malaysia to exercise caution.

These include, among others, overreliance on foreign companies could reduce the sovereign control over strategic sectors.
Moreover, profits generated by foreign companies could be repatriated to home countries, thus reducing the economic benefit retained in Malaysia.

Another major concern is the uneven playing field between foreign and local businesses that could threaten the development and survival of domestic enterprises.
Malaysia’s Direct Investment Abroad Outward direct investment or DIA offers several benefits to investors, including diversification to reduce dependency on a single market and minimise risks associated with economic downturns in the home economy.

In addition, companies gain potential benefits from abundant foreign resources such as raw materials, industry experts, advanced technologies as well as market access in the respective region.
Investing abroad also exposes companies to international business practices, fostering innovation and increasing global competitiveness.

A notable amount of DIA registered during the pre-pandemic period proved that Malaysian companies are globally competitive with an annual average of RM35.7 billion recorded from 2005 to 2019.

However, the depreciation of ringgit posed a challenge to Malaysian companies investing abroad.
The unfavourable global economic environment and geopolitical tensions have also impacted the investment landscape globally.

These challenges have affected the performance of DIA which trended downward from 2015 to 2018 and dropped sharply in 2020 due to COVID-19 pandemic.

Nevertheless, the trend rebounded in 2021 and 2022 following the resumption of economic activities post-pandemic.
From the sectoral perspective, DIA are primarily focused on the services sector, particularly financial and insurance/takaful activities.

Investment contribution in the services sector expanded from 61% in 2010 to 72% in 2022, partly attributed to a surge in wholesale and retail trade sector.
Meanwhile, the contribution of the commodity-based sector dropped from 27.5% in 2010 to 14.6% in 2022, in tandem with reduced dependency on low value-added activities as well as the evolution in global megatrends, as shown in Figure 2.2.6.

91 Chapter 2 2024.indd 91 06/10/2023 5:49 PM economic outlook 2024chapter 2 macroeconomic outlook FIGURE 2.2.6.
Malaysia’s Direct Investment Abroad by Sectors (% share) 27.5% 28.9% 61.2% 0.5% 10.8% 0.8% 13.9% 56.5% 14.6% 3.0% 10.2% Wholesale & Retail Trade, 32.3% 72.2% Information & Communication, 14.4% Financial & Insurance/Takaful Activities, 38.7% Other Services, 14.6% 2010 2016 2022 MANUFACTURING SERVICES ACTIVITIES COMMODITY-BASED CONSTRUCTION Source: Bank Negara Malaysia and Department of Statistics, Malaysia Southeast Asia remains the preferred investment destination for Malaysian companies, which accounted for 44% of total DIA in 2010 and expanded to 50% in 2022, as depicted in Figure 2.2.7.
Meanwhile, Malaysian companies’ investment in Europe has gained traction with a significant increase in share of DIA from 16% in 2010 to 36% in 2022.

Similarly, there was an increase in the North American market contribution from 0.5% in 2010 to 6.9% in 2022.

Both markets attraction can be attributed to their attractive investment returns.

FIGURE 2.2.7.
Malaysia’s Direct Investment Abroad by Major Block of Countries RM billion 0 -5 -10 -15 -20 -25 -30 Southeast Asia Europe Latin America North America 2022 2016 2010 Source: Bank Negara Malaysia and Department of Statistics, Malaysia 92 Chapter 2 2024.indd 92 06/10/2023 5:49 PM economic outlook 2024chapter 2 macroeconomic outlook However, it is important to note the challenges of DIA to Malaysian companies, such as regulatory differences, which could lead to complexities and potential legal issues for companies operating in multiple jurisdictions.
In addition, investment abroad is at risk of currency volatility, thus impacting profits and cash flows.

The companies are also vulnerable to geopolitical risks, including changes in government policies, trade tensions and political instability.

Moving Forward As envisaged under the Ekonomi MADANI framework, Malaysia aims to be a leader at the global front, hence efforts shall be focused on increasing its competitiveness and promoting the nation as a prime investment destination.
In this regard, a comprehensive investment policy with concerted efforts between government agencies and private sectors will be intensified.

At the same time, Malaysian companies should also actively explore new emerging markets and venture into greenfield investments such as ESG-related investment.
Recognising the significant contribution of investment to the economic development, the National Investment Aspirations (NIA) was introduced in 2022 as a key guiding principle for the Malaysia’s New Investment Policy (NIP), 2022 – 2027.

The New Industrial Master Plan 2030 (NIMP 2030) was recently launched to further boost high quality FDI and DIA.
Five key pillars have been outlined in these policy documents to reinvigorate the investment ecosystem, underpinned by the need to enhance the ESG practices across the economy.

The key pillars are to increase economic complexity; create high-value job opportunities; extend domestic linkages; develop new and existing clusters; and improve inclusivity.

Conclusion FDI and DIA play a significant role in shaping Malaysia’s economic landscape.
FDI has been a driving force behind Malaysia’s economic growth and industrialisation.

DIA, on the other hand, reflects the expansion of Malaysian businesses globally.

Thus, it is crucial for Malaysia to adopt balanced and strategic approaches to FDI and DIA that encourage high-quality and high-value investments, while simultaneously, transfer valuable knowledge and resources to further accelerate economic growth and expedite the transition into an advanced economy.
Prices Headline inflation continues to moderate The Consumer Price Index (CPI) grew by 2.8% from January to August 2023, attributed to moderating trend in global commodity prices; easing supply-related disruptions; existing price controls and provision of subsidies for selected items; as well as the lagged impact from the normalisation of OPR.

Inflation is expected to moderate in the remaining months, while core inflation is expected to remain elevated relative to the long-term average.
For the year, inflation is estimated to range between 2.5% to 3%.

The Producer Price Index (PPI) by local production decreased by 2.4% during the first eight months of 2023, attributed to moderate global commodity prices, particularly crude oil.

Within specific sectors, the contraction in PPI was predominantly driven by a significant decrease in agriculture, forestry and fishing (19.4%) as well as mining (8.4%) sectors.
The PPI is expected to contract between -2.5% to -0.5% in 2023, given lower global input cost.

93 Chapter 2 2024.indd 93 06/10/2023 5:49 PM economic outlook 2024chapter 2 macroeconomic outlook TABLE 2.12.
Consumer Price Index, January – August 2022 and 2023 (2010 = 100) CPI Food and non-alcoholic beverages Alcoholic beverages and tobacco Clothing and footwear Housing, water, electricity, gas and other fuels Furnishings, household equipment and routine household maintenance Health Transport Communication Recreation services and culture Education Restaurants and hotels Miscellaneous goods and services 1 Based on Household Income and Expenditure Survey 2016 Note: Total may not add up due to rounding Source: Department of Statistics, Malaysia TABLE 2.13.
Producer Price Index, January – August 2022 and 2023 (2010 = 100) PPI Agriculture, forestry and fishing Mining Manufacturing Electricity and gas supply Water supply Producer Price Index by stage of processing Crude materials for further processing Intermediate materials, supplies and components Finished goods 1 Based on Economic Census 2016 Note: Total may not add up due to rounding Source: Department of Statistics, Malaysia 94 WEIGHT1 CHANGE (%) CONTRIBUTION TO CPI GROWTH (PERCENTAGE POINTS) -2.6 1.7 1.8 6.2 2.4 3.10 1.50 0.01 0.00 0.40 0.14 0.01 0.66 0.00 0.09 0.01 0.12 0.12 2.80 1.69 0.02 0.01 0.41 0.11 0.04 0.23 -0.12 0.08 0.02 0.18 0.16 WEIGHT1 CHANGE (%) CONTRIBUTION TO PPI GROWTH (PERCENTAGE POINTS) 2022 2023 2022 2023 100.000 6.730 7.927 81.571 3.442 0.330 100.000 16.410 56.119 27.471 9.7 11.0 18.8 9.2 0.4 1.8 9.7 13.7 12.2 1.1 -2.4 -19.4 -8.4 0.2 0.8 3.2 -2.4 -14.8 -0.2 3.6 9.700 0.740 1.490 7.505 0.014 0.006 9.700 2.248 6.847 0.302 -2.400 -1.306 -0.666 0.163 0.028 0.011 -2.400 -2.429 -0.112 0.989 Chapter 2 2024.indd 94 06/10/2023 5:49 PM economic outlook 2024chapter 2 macroeconomic outlook FIGURE 2.8.
Consumer Price Index and Producer Price Index Trends (% change) % 5 4 3 2 1 0 -1 J Consumer Price Index J A 2021 O J A 2022 J O J A 2023 J % 30 25 20 15 10 5 0 -5 -10 % 16 14 12 10 8 6 4 2 0 -2 -4 -6 Producer Price Index J J A 2021 O J A 2022 J O A J 2023 J % 100 80 60 40 20 0 -20 -40 CPI TRANSPORT FOOD AND NON-ALCOHOLIC BEVERAGES HOUSING, WATER, ELECTRICITY, GAS AND OTHER FUELS RIGHT SCALE PPI AGRICULTURE, FORESTRY AND FISHING MINING MANUFACTURING RIGHT SCALE Source: Department of Statistics, Malaysia Labour Market Strong improvement in labour market Recovery in the labour market remained strong in the first half of 2023 in tandem with stable economic growth driven by the encouraging domestic demand.
Thus, aggregate demand for labour increased, creating more job opportunities in the market.

The labour force increased by 2.7% to record 16.3 million persons, resulting in a significant rise in the labour force participation rate to 69.9%.

Similarly, total employment also registered a higher growth of 3.4% to record 15.7 million employed persons.
These improvements have led to a substantial reduction in the unemployed persons to 569,400, with the unemployment rate of 3.5%, indicating the trend of the labour market is returning to the pre-pandemic level.

The services (65.3%) and manufacturing (16.8%) sectors remained as the main source of employment opportunities in the economy.

Other labour market indicators also continued to progress positively during the same period.
Job placements increased by 58% to over 72,000 signifying more job seekers managed to secure new jobs while the number of retrenchments remained low at 21,371 persons as businesses are retaining adequate talents to support encouraging business operations.

Meanwhile, the number of vacancies registered as at end-June 2023 were over 164,000 positions, mostly in semi- and low-skilled occupations.

However, the number of job seekers declined by 18% to record around 52,000 persons.
This may indicate that more people are more interested in self- employment as the main source of income as opposed to standard paid employment.

The labour market is expected to sustain the improving growth momentum in the second half of 2023, backed by continuous enhancements in the domestic economy.

Thus, the overall unemployment rate in 2023 is expected to record around 3.5% while employment increasing by 2.6% to register 15.8 million persons.
The services sector remains as the major source of employment with a share of 65.1%, mainly in the wholesale retail and trade, as well as accommodation and food and beverages subsectors.

The manufacturing sector is expected to provide 16.7% of total employment, particularly in the E&E as well as food and beverages industries, while the agriculture sector accounting for 10%, especially in the oil palm industry.
95 Chapter 2 2024.indd 95 06/10/2023 5:49 PM economic outlook 2024chapter 2 macroeconomic outlook TABLE 2.14.
Labour Market Indicators (‘000) 20232 H11 20243 H11 Labour force Employment Unemployment 16,312.3 16,358.6 16,669.4 15,743.0 15,784.2 16,099.9 569.4 574.4 569.5 2.7 3.4 (3.5) CHANGE (%) 20232 2.1 2.6 (3.5) 20243 1.9 2.0 (3.4) 1 January to June 2023 2 Estimate 3 Forecast Note: Figures in parentheses refer to unemployment rate Source: Department of Statistics and Ministry of Finance, Malaysia TABLE 2.15.
Employed Persons by Sector (‘000) H12 20233 20244 H12 Agriculture, forestry and fishing 1,555.8 1,574.7 1,603.0 Mining and quarrying 84.9 84.9 85.5 SHARE (%) Manufacturing Construction Services Total1 1 Total includes ‘Activities of extraterritorial organisations and bodies’ 2 January to June 2023 3 Estimate 4 Forecast Source: Department of Statistics and Ministry of Finance, Malaysia As at end-August 2023, the number of registered low-skilled foreign workers increased by 43.1% to 1.8 million persons compared to 1.2 million persons in the same period last year partly attributed to the temporary implementation of a relaxation programme during the first quarter of the year.
The programme aimed to expedite the approval process of low-skilled foreign workers recruitment into Malaysia in meeting the labour requirement from all economic sectors, particularly in plantation and construction sectors.

The total foreign workers were sourced mainly from Bangladesh (32.1%), Indonesia (24.7%) and Nepal (19.6%).

The manufacturing sector employed the highest number of foreign workers with a share of 35.1%, followed by construction (22.3%) and services (16.4%) sectors.
Nevertheless, the hiring of low-skilled foreign workers was kept within the threshold of below 15% from the total employment in line with current policy to reduce economic reliance on migrant workers.

Likewise, the number of expatriates increased by 20.7% to register 106,788 persons, which is partly due to the relaxation of migrant workers mobility.

Majority of expatriates were from China (22%), India (19.8%) and Japan (7.5%).
Expatriates were mainly employed in the services (51.3%), information technology (37.1%) and construction (7.6%) sectors.
Labour productivity improved by 1.2% to RM47,124 in the first half of 2023, cushioned by productivity improvements in the construction and services sectors, particularly 96 Chapter 2 2024.indd 96 06/10/2023 5:49 PM economic outlook 2024chapter 2 macroeconomic outlook in transportation and storage as well as real estate and business services subsectors, despite marginal contractions in agriculture, manufacturing and mining sectors.
Overall, labour productivity is expected to improve by 1.4% to RM97,200 in 2023, following continuous productivity gains expected in construction (6.3%) and services (2.2%) sectors.

In 2022, the average monthly salaries and wages received by paid employees1 increased by 5.8% to RM3,212 per employee.

The increment was partly due to the revision of the monthly minimum wage from RM1,200 to RM1,500, which came into effect on 1 May 2022.
All industries recorded a positive wage growth, particularly in tourism-related industries as well as other service activities.

Further improvement in productivity and employment opportunities is expected to increase the overall salaries and wages by 4.4% to RM3,355 in 2023.

Outlook For 2024 Global Outlook Modest growth prospect The global economy is projected to grow by 3% as a result of moderate growth in both advanced economies and EMDEs.
Advanced economies’ growth is expected to moderate further to 1.4%, which will continue to weigh down the global growth.

The US’s GDP is anticipated to grow at a slower pace by 1% amid continuous monetary policy tightening.

Meanwhile, growth in the euro area is expected to expand slightly to 1.5% supported by stronger services and tourism activities.
The EMDEs’ growth is projected to expand by 4.1% with China’s economy is forecast to moderate to 4.5%, underpinned by continuous lower investment and bearish labour market.

Meanwhile, the economy of India is expected 1 Refer to Malaysian citizens.

to grow by 6.3%, mainly contributed by continuous domestic investment.

The ASEAN-5’s growth is forecast to moderate to 4.5%.
Global trade is projected to improve to 3.7% following uptrend trade activities in advanced economies and EMDEs, which are expected to grow by 3.2% and 4.5%, respectively.

Both exports and imports in advanced economies are expected to grow by 3.1% and 2.7%, respectively.

Likewise, exports grow by 4.3% and imports by 5.1% for EMDEs.

Underpinned by the expected further tightening of monetary policies, global inflation is forecast at 5.2%, with advanced economies projected at 2.8% and EMDEs at 6.8%.
These are also supported by improvements in global supply chain as well as easing of energy and food prices.

Domestic Outlook Sectoral Services Sector Spearheading growth for resilient economy The services sector is forecast to increase by 5.6% in 2024 driven by expansion in all subsectors.

In addition, vibrant tourism-related activities as well as continuous consumer spending are expected to further spur the growth of the sector.
The wholesale and retail trade subsector will remain as the key contributor to the services sector with the expected growth of 5.6%.

The growth will be driven by the expansion in retail segment through wider automation, e-commerce and omnichannel shopping experience, which enable seamless physical and online interactions.
The motor vehicles segment is also anticipated to expand with the introduction of environmentally-friendly models 97 Chapter 2 2024.indd 97 06/10/2023 5:49 PM economic outlook 2024chapter 2 macroeconomic outlook featuring advanced technology, particularly EV and hybrid vehicles within the lower price range.
The real estate and business services subsector is poised to grow by 5.4% attributed to sustained demand for professional services, particularly in the field of engineering following vigorous construction activities.

In addition, the real estate segment is projected to improve owing to the increase in non-residential and residential property transactions.
Meanwhile, the information and communication subsector is expected to expand by 6.5%, primarily underpinned by telecommunication segment following fast rollout of 5G coverage and the adoption of a dual network model.

The performance of the subsector will also benefit from the increasing demand for high-speed connectivity, particularly through the adoption of satellite internet technology in rural and remote areas.
Likewise, the digital-based services are anticipated to spur the subsector’s growth following streaming coverage of major events such as the 2024 UEFA European Football Championship (UEFA Euro 2024) and the 2024 Olympic Games; adoption of cloud solutions and services; and the uptick in social commerce activities.
The transportation and storage subsector is forecast to grow by 7.4%, supported by all segments following the expansion in rail, highway, port and airport activities as well as buoyant external demand.

The land transport segment is anticipated to increase propelled by improvement in frequencies of rail services as well as higher traffic volume at all main highways.
Likewise, the air transport segment is projected to rise following higher passenger traffic induced by competitive airfares as airlines increasing their capacity and flight frequencies.

Meanwhile, the water transport segment is expected to remain steady backed by the expansion in cargo and container handling capacity.
Furthermore, the commencement of Malaysia Maritime Single Window, a unified digital platform by the end of 2023 is expected to enhance port’s 98 competitiveness and further facilitate shipping services.

The platform serves as a one-stop portal for single submission of documents related to maritime regulatory and port services.
The food & beverages and accommodation subsector is poised to grow by 7.9%, attributed to the steady rise in tourist arrivals that will drive the hospitality industry, surpassing the pre-pandemic level.

The tourism industry will benefit from the provision and upgrading of tourism facilities as well as the adoption of digital platforms for promotional activities.

In addition, 2024 visit state year programmes in Melaka, Perak and Perlis are expected to contribute to the subsector’s growth.
The finance and insurance subsector is projected to rebound by 4.3%, driven by resilient economic and investment activities and greater clarity in economic policy and direction, following the implementation of NETR, NIMP 2030 and Mid-Term Review of the Twelfth Malaysia Plan (MTR of the Twelfth Plan).

These endeavours, as well as the increasing digitalisation of financial services, will induce the demand for financing, mortgages and loan facilities.
The insurance segment is projected to rebound, supported by strong capital and adequate liquidity.

Nonetheless, net claims are expected to remain elevated due to rising medical costs and sustained demand for medical treatment services.

The utilities subsector is forecast to rise by 5.3%, driven by the increasing demand for electricity usage, particularly industrial, commercial and domestic segments.
Energy consumption in the industrial segment is expected to moderate as compared to commercial and domestic segments due to energy efficiency initiatives and the increase in self-generating energy sources in the industrial segment, including rooftop solar.

Nevertheless, the increasing demand for vehicle charging infrastructure, targeted at 10,000 EV charging bays by 2025 supported by the expectation of high EV sales, will boost electricity consumption.
Chapter 2 2024.indd 98 06/10/2023 5:49 PM economic outlook 2024chapter 2 macroeconomic outlook The other services subsector is projected to rise by 5%, driven by private health and education segments.

The Malaysia Healthcare Travel Council (MHTC) will engage in reinvigorating the Malaysian healthcare industry in an effort to establish a larger market base, especially in targeted markets such as China, India and Indonesia.
In 2024, MHTC estimates that the healthcare tourism industry’s revenue trajectory will be restored to its pre-pandemic level at RM1.7 billion.

Meanwhile, Malaysia will continue to draw in students from abroad through continuous promotional efforts by the Education Malaysia offices and the Education Malaysia Global Services, along with local universities.
These include implementing high-impact programmes to promote the Education Malaysia brand overseas, namely Edutourism; Meet and Greet with International Students in Malaysia; and the International Higher Education Seminar.

Correspondingly, the government services subsector is forecast to record a growth of 4.7% in 2024.
Manufacturing Sector Export-oriented industries gain traction The manufacturing sector is forecast to expand by 4.2% in 2024 driven by better performance in both export- and domestic- oriented industries.

The export-oriented industries are expected to benefit from the recovery of external demand with E&E segment projected to surge, primarily driven by memory products.

This is in line with the rebound in demand for technologically advanced products.
Similarly, domestic-oriented industries are anticipated to grow steadily backed by higher output in transport- and construction-related segments, in tandem with better consumer spending and business activities.

In addition, the implementation of initiatives under the Chemical Industry Roadmap 2030, NETR and NIMP 2030 will further strengthen the sector’s growth.
Agriculture Sector Expansionary trend continues The agriculture sector is expected to grow by 1.2% in 2024 driven by expansion in most subsectors, particularly oil palm, other agriculture and livestock.

With the anticipation of minimal impact from the El Niño phenomenon and labour conditions returning to pre-pandemic level, the oil palm production is projected to increase, contributing to the subsector’s growth.
Furthermore, increased matured area especially in Peninsular Malaysia and higher oil extraction rate arising from more frequent harvesting rounds are also expected to support the subsector's growth.

The CPO price is forecast to average within the range of RM4,000 and RM4,500 per tonne in 2024 (2023: RM3,500 – RM4,000 per tonne), partly attributed to anticipation of low output from other vegetable oils and higher demand for CPO from major importing countries.
The other agriculture and livestock subsectors are anticipated to expand further, driven by concerted efforts to strengthen food security and modernise the agriculture sector.

In addition, the rubber subsector is expected to gain traction on account of better labour supply as well as more tapping activities by smallholders following Government’s initiatives to increase income.
Mining Sector Poised for expansion The mining sector is forecast to rebound by 2.7% in 2024 driven by remarkable performance in natural gas as well as crude oil and condensate subsectors.

Anticipation of first natural gas production from new gas field development projects such as Gansar, Jerun and Kasawari as well as higher production from the existing gas fields are estimated to boost the growth of the natural gas subsector.
In addition, the mining sector is also expected to benefit from higher production of crude oil and condensate, especially in Peninsular 99 Chapter 2 2024.indd 99 06/10/2023 5:49 PM economic outlook 2024chapter 2 macroeconomic outlook Malaysia and Sarawak.

In terms of prices, the Brent crude oil is projected to average at USD85 per barrel on anticipation of higher demand given the positive global outlook for the year.
However, changes in world production and consumption could significantly alter the oil prices forecast.

Construction Sector Growth remains robust The construction sector is forecast to increase by 6.8% in 2024 following better performance in all subsectors.
Civil engineering subsector continues to be bolstered by strategic infrastructure and utilities projects which include ongoing projects such as the Central Spine Road (CSR), the Pan Borneo Sabah Highway and acceleration of projects under the Twelfth Malaysia Plan, 2021 – 2025 (Twelfth Plan).

Furthermore, a new solar power plant project under the Corporate Green Power Programme will support the subsector’s growth.
The implementation of NIMP 2030 is expected to further strengthen the performance of non-residential buildings subsector as the Plan will provide a platform to attract more investments into the country.

In addition, the residential buildings subsector is projected to improve further in line with the Government’s effort to increase more affordable houses as outlined under the MTR of the Twelfth Plan and the MADANI Neighbourhood scheme, as well as new launching by the private sector.
Domestic Demand Continuous expansion in private sector expenditure Domestic demand is forecast to expand by 5.3% in 2024.

Private sector expenditure continues to lead economic activities with a growth of 5.6%, contributing 4.3 percentage points to GDP growth.

Meanwhile, public sector expenditure is estimated to increase by 4.1% with a contribution of 0.7 percentage points to GDP growth.
100 Private consumption is expected to increase by 5.7% owing to continued improvement in the labour market as well as stronger domestic economic and social activities.

In addition, Government initiatives, including cash transfers to targeted groups are envisaged to support household spending.

Major events such as the UEFA Euro 2024 and the 2024 Olympic Games; as well as the growing social commerce trend are also expected to boost private consumption in 2024.
Private investment is likely to register a growth of 5.4%, in tandem with more favourable business sentiments and improved external environment.

As such, the private sector is expected to intensify its efforts to inject additional capital outlays in the economy.

In addition, private investment will continue to benefit from the realisation of approved investments by MIDA, mainly in the E&E, transport equipment, as well as information and communications subsectors.
It is also envisaged that investors will respond positively to the Government’s strategies and measures in attracting high-tech and high-value investments such as those outlined under the NETR and NIMP 2030.

Public investment is projected to increase by 8.3% in 2024, supported by higher Federal Government’s DE and non-financial public corporations expenditure.
In addition, DE allocation will be channelled mainly to social and economic sectors in tandem with objectives outlined in the MTR of the Twelfth Plan.

The continuation of transport- related projects such as CSR, ECRL and Rapid Transit System Link as well as acceleration of refurbishments of dilapidated schools and clinics in rural areas will also generate the momentum for the public investment growth trajectory.
Strategic projects that are expected to commence in 2024 include the flood mitigation projects as well as expansion of Samajaya High-Tech Park in Sarawak and Tok Bali Industrial Park in Kelantan.

Meanwhile, public consumption is expected to grow by 2.6%, driven by higher spending in supplies Chapter 2 2024.indd 100 06/10/2023 5:49 PM economic outlook 2024chapter 2 macroeconomic outlook and services to improve the public service delivery, coupled with the effort to spend more effectively and efficiently.
In line with the expansion in domestic economic activities, the GNI at current prices is expected to increase by 6.2% in 2024.

Similarly, the GNS is anticipated to expand by 2.9% to RM471.8 billion, with total investment envisaged to increase by 3.3% to RM409.6 billion.

The share of GNS is projected to remain significant at 24.6% of GNI.

The savings-investment gap is expected to remain in surplus at RM62.2 billion or 3.2% of GNI.
This provides sufficient liquidity in the financial system, which can be mobilised to finance long-term investments in the country.

Income The need for structural reform to support higher income An encouraging economic growth anticipated in 2024 will stimulate higher income prospects for the workforce.
Existing initiatives will be intensified by adopting advanced technology in production activities, improving productivity through retraining and upskilling as well as reducing reliance on low-skilled foreign workers.

Hence, the share of CE of GDP is projected to improve to 33.1% in 2024.

Nevertheless, the share is still relatively low compared to other advanced economies and the CE target of 40% in 2025.
Thus, transformation from a low-wage labour market structure to a decent wage standard is vital in achieving a more equitable distribution of economic growth between employees and capital owners.

Employers must also consider paying higher wages as a source of growth, which would not only alleviate the prolonged structural issues in the labour market, but could also contribute to a higher business growth.
The share of GOS of GDP is forecast to decline to 63.8% in 2024, with capital owners continue to receive a sizable share of GOS.

Meanwhile, mixed-income for the self-employed or independent entrepreneurs is expected to improve by 8.9% as the rising demand for gig works will create more earning prospects for this group.
Efforts to enhance social protection among all self-employed workers, including those in the informal sector may also attract more participation from youth to choose self- employment as the main source of income.

As a result, the share of mixed-income to GDP is projected to rise to 15.5%.
The indirect tax and non-tax revenue on production and imports is projected to expand further at 4.5% in 2024 in tandem with the continued efforts to increase revenue collection and strategies to implement a wider tax base.

Meanwhile, expenditure for subsidies and incentives is expected to decrease by 24.8% in line with the Government’s move to rationalise subsidies and implement a more targeted assistance.

Thus, income from net taxes on production and imports is projected to contribute 3.1% to GDP.
External Sector Recovery in external demand to invigorate trade In 2024, gross exports are anticipated to grow by 5.1% across all sectors, supported by better performance in global trade and improved prospects in commodity sector.
Furthermore, the growth is partly attributed to the ratification of trade agreements, namely the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), that will enable Malaysian products to further penetrate into wider markets.

Exports of manufactured goods are projected to rebound by 5.5% resulting from rising demand for both E&E and non-E&E products, constituting 48.1% and 51.9%, respectively.
The E&E products are forecast to grow by 4.9% bolstered by the steady demand for semiconductor, following the upcycle trend in E&E.

The projected growth is also in tandem 101 Chapter 2 2024.indd 101 06/10/2023 5:49 PM economic outlook 2024chapter 2 macroeconomic outlook with the implementation of the NIMP 2030 that will propel high-impact sectors such as E&E and aerospace.
Similarly, exports of non-E&E are estimated to expand by 6.1% following increasing demand, particularly for petroleum products, chemicals and chemical products as well as manufactures of metal.

Exports of agriculture goods are forecast to expand by 1.7%, supported by a higher demand for palm oil and palm oil based agriculture products amid anticipated minimal impact from the El Niño phenomenon.
Furthermore, export earnings from mining goods are estimated to increase by 2.9% contributed by stronger demand from major markets, particularly for LNG (3.2%) and crude petroleum (2.8%), as well as favourable global energy prices.

Gross imports are expected to increase by 4.9% in 2024 buoyed by higher demand for intermediate, capital and consumption goods.
Imports of intermediate goods are anticipated to grow by 5.2%, mainly attributed to the expansion in construction sector fuelled by strategic infrastructure and utilities projects as well as acceleration in the implementation of projects under the Twelfth Plan.

Furthermore, imports of capital goods are projected to expand by 5.1% in tandem with favourable investment activities.

In addition, imports of consumption goods are anticipated to rise by 4.1%, driven by food and beverages.
The current account balance is expected to register a surplus of RM62.2 billion or 3.2% of GNI in 2024, on the back of continuous improvement in economic activities.

The goods account is projected to record a surplus of RM174.9 billion following better growth prospect in major trading partners.

Higher earnings in the transport, travel and other services accounts are anticipated to narrow the deficit in services account to RM35.9 billion.
Receipts from transport account are projected to rise to RM34.2 billion, bolstered by higher earnings from air travel and cargo handling services provided by domestic companies.

However, the continued reliance on foreign transport services is anticipated to result in an increase 102 in payments for transport account, reaching RM62.1 billion, amid robust trade activities.
Earnings in the travel account is expected to improve to RM76.6 billion attributed to thriving tourism activities in 2024 following higher tourist arrivals and per capita spending.

Similarly, payments in travel account are anticipated to increase to RM53.8 billion due to residents’ spending abroad for business, education and pilgrimage travelling activities.
Meanwhile, with the ongoing implementation of strategic projects and stronger economic activities following expansion in the services, manufacturing and construction sectors, the other services account is expected to register a wider deficit of RM30.7 billion due to higher payments.

The primary income account is projected to record a wider deficit of RM58.5 billion owing to higher payments by foreign investors in tandem with the ongoing investment activities.
Additionally, the continuous adoption of advanced technology, including artificial intelligence, cloud computing, digitalisation and automation is expected to increase the compensation for foreign professionals, thus contributing to the higher deficit.

Similarly, the secondary income account is anticipated to register net outflows of RM18.3 billion mainly due to higher remittances by foreign workers.
Prices Projected to remain manageable The inflation rate is forecast to range between 2.1% to 3.6% in 2024, partly attributed to a gradual shift towards targeted subsidy mechanism in ensuring a more equitable distribution of resources.

Additionally, potential risks to the inflation outlook remain subject to the fluctuations in exchange rates and supply-related factors, such as global commodity prices, geopolitical uncertainties and climatic conditions.
Meanwhile, the PPI is expected to be higher in 2024 between 0.1% to 2.1% in tandem with diminishing base effect and better production activities.

Chapter 2 2024.indd 102 06/10/2023 5:49 PM economic outlook 2024chapter 2 macroeconomic outlook Labour Market A more promising employment prospect Anticipation of better economic growth prospects in 2024, attributed to a stable domestic and external economy, will stimulate stronger labour demand and spur a more solid growth in employment opportunities.
Efforts to uplift the wellbeing of the workforce and attract higher participation into the labour market, as outlined in the Ekonomi MADANI framework, will be carried out.

These include strengthening skills training programmes to be more demand-driven, providing a more conducive working environment for women and expanding the social protection coverage for all workers.

As a result, the unemployment rate in 2024 is anticipated to return to the pre-pandemic level at 3.4%.
The total employment is projected to expand by 2% to reach 16.1 million persons with more than 80% of employment opportunities continue to be provided by the services and manufacturing sectors.

The number of low-skilled foreign workers and expatriates is expected to increase in 2024 as a result of strategies to facilitate the supply of sufficient workers in meeting industries’ requirement.
Nevertheless, the Government will continue to encourage productivity improvements through automation and digitalisation, mainly in labour-intensive industries.

Efforts will also be taken to expedite the implementation of a multi-tiered levy system as well as encourage employers to give more employment opportunities for locals to reduce the reliance on migrant workers.
Labour productivity is projected to expand further by 2.9% to RM99,900 in 2024, mainly contributed by the services sector, following robust activities in tourism-related industries.

Strengthening the implementation of talent skills enhancement programmes and strategies to shift industrial structure towards technology-driven will also contribute to the improvement in labour productivity.
Similarly, average monthly salaries and wages are anticipated to grow by 4.7% to RM3,514 in 2024, in line with the progression in labour productivity and favourable economic growth.

Initiatives to transform the wage ecosystem and foster employers to perceive higher wages as a source of growth will also contribute to higher salaries and wages.
Strategies outlined in the MTR of the Twelfth Plan and NIMP 2030 to create high-value job opportunities and accelerate industries’ technology adoption will contribute to higher CE in 2024, thus positioning the economy on track to realising the target of CE at 45% of GDP in the long-term.
Conclusion The global economy is anticipated to moderate in 2023 and 2024 due to various downside risks, including weaker-than-expected global demand; tighter global financial conditions; worsening trade tensions between major economies; mounting geopolitical uncertainty; and a further rise in protectionist measures.

World trade is projected to moderate in 2023 in line with weaker global demand.

However, world trade is expected to strengthen in 2024 in tandem with improved trade activities.
As an open economy, Malaysia is not spared from external developments.

Thus, the GDP is expected to moderate in 2023.

Nonetheless, the economy is expected to strengthen in 2024 supported by expansion in all sectors and better prospect in global trade.

Efforts will be intensified to strengthen Malaysia’s agility in keeping pace with the fast-changing environment, which requires a paradigm shift and innovation culture to enhance economic growth.
The continuation of strategic projects, digitalisation, improved productivity and advanced manufacturing will further stimulate the growth of the economy in the medium term.

All economic sectors are expected to benefit from the recent policies such as NETR, NIMP 2030 and MTR of the Twelfth Plan, which are in tandem with the Ekonomi MADANI framework.
Looking ahead, effective implementation of these policies will further enhance economic growth and resilience as Malaysia navigates through the challenging global landscape.

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106 Chapter 2 2024.indd 106 06/10/2023 5:49 PM economic outlook 2024chapter 2 macroeconomic outlook chapter 3 Monetary and Financial Developments 109 ov e rv i e w 109 moneta ry de v e lopme nts 110 pe r for m a nce of r i nggi t 111 ba nk i ng s ec tor pe r for m a nce 114 c a p i ta l m a r k e t pe r for m a nce Information Box 3.1 – Key Capital Market Measures 120 i s l a m ic ba nk i ng a nd c a p i ta l m a r k et pe r for m a nce Information Box 3.2 – An update: Bolstering Islamic Finance in Malaysia 127 conclus ion 128 r e fe r e nce s Chapter 3.indd 107 Chapter 3.indd 107 05/10/2023 8:22 PM 05/10/2023 8:22 PM Chapter 3.indd 108 Chapter 3.indd 108 05/10/2023 8:22 PM 05/10/2023 8:22 PM chapter 3 Monetary and Financial Developments Overview Financial market resilience amid external turbulence Monetary and financial conditions remain supportive of financial intermediation activities with demand for financing continues to be sustained, supported by steady economic growth and improved labour market conditions.
Banks’ lending capacity remains sound backed by strong capital and liquidity buffers.

The capital market exhibits resilience underpinned by a deep and broad market, and initiatives undertaken to enhance its efficiency and competitiveness.

Monetary policy has been normalised to its pre-pandemic level.

At the Overnight Policy Rate (OPR) of 3.00%, the policy remains supportive of sustainable economic growth while ensuring an environment of price stability.
Nevertheless, the domestic financial market performance is confronted by challenges, mainly emanating from external factors.

These factors include the pace of monetary policy tightening by global central banks, the banking distress in the increment was commensurate with the health of the economy and signified the withdrawal of monetary stimulus provided during the COVID-19 crisis to support economic recovery.

The OPR was subsequently maintained at 3.00% until September.

FIGURE 3.1.
FIGURE 3.1.

Overnight Policy Rate Level (%) % 3.00 2.75 2.50 2.25 2.00 1.75 1.50 3.00 SJMDSJMDSJMDSJMDS US and Europe, the US debt ceiling debacle, 2019 2020 2021 2022 2023 geopolitical tensions and China’s flagging economic recovery.

Source: Bank Negara Malaysia Monetary Developments Policy rate returns to the pre-pandemic level Monetary policy resumed its normalisation path in 2023 amid resilient domestic growth.
The OPR was adjusted in May with an increment of 25 basis points (bps), bringing the OPR to its pre-pandemic level of 3.00%.

This At the global level, the policy normalisation exercise which commenced in 2022 witnessed central banks tightening monetary policies at varying paces.
Bank Negara Malaysia (BNM) took a more prudent approach in normalising monetary policy, which was done gradually and at a measured pace compared to other major and regional central banks which increased their policy rates quickly and by larger magnitudes to manage soaring inflation.
109 Chapter 3.indd 109 Chapter 3.indd 109 05/10/2023 8:22 PM 05/10/2023 8:22 PM economic outlook 2024chapter 3 monetary and financial developments From January 2022 to September 2023, Monetary policy will continue to be guided by total increase of policy rate in Malaysia was the mandate of achieving price stability and relatively low at 125 bps compared with other sustainable economic growth in the long term.
major economies, particularly the US (525 In carrying out this mandate, the Monetary bps) and the UK (500 bps), as well as regional Policy Committee (MPC) remains vigilant to economies such as the Philippines (425 bps) ongoing developments and how evolving and Indonesia (225 bps).

FIGURE 3.2.
Comparison of Interest Rates among Central Banks, January 2022 – September 2023 (basis points, bps) 0.25% - 5.50% 525 0.25% - 5.25% 500 2.00% - 6.25% 425 0.10% - 4.10% 400 bps 600 500 400 300 200 1.75% - 3.00% 100 125 1.25% - 3.50% 3.50% - 5.75% 225 225 0.50% - 2.50% 200 Source: Bank Negara Malaysia and Bloomberg domestic and global conditions will impact the overall outlook of domestic inflation and growth.
Performance of Ringgit External factors suppressing the ringgit The movement of the ringgit in the first eight months of 2023 was mainly driven by global factors, particularly development in the US and weaker-than-expected recovery of China’s economy.

The ringgit began the year on a strong note, appreciating by 3.2% to close at RM4.2677 against the US dollar as at end- January.
The strong performance was buoyed by expectations that the US Federal Reserve (Fed) will reach its terminal interest rate soon and optimism surrounding China’s reopening.

Nevertheless, the ringgit began to experience a series of depreciations from the middle of February until August.

The depreciation was attributed to the change in narrative towards a hawkish tone regarding US policy rate The interest rates in the banking system increases during this period.
The ringgit was remained steady for the first four months of also compounded by the slowdown of China’s 2023 prior to the upward adjustment of the economic recovery where the People’s Bank of OPR in May.

In tandem with the increase, the weighted average lending rate (ALR) trended China announced surprise rate cuts in June and August, which weakened the renminbi and this higher by 21 bps to 5.07% as at end-July.
continued to affect sentiments surrounding the Higher OPR also led to an increase in the ringgit.

average saving deposit rate, which increased by 9 bps to 0.96% during the same period.

During the same period, foreign exchange Similarly, returns to depositors increased by markets were also affected by the collapse between 20 to 29 bps, with average nominal of Silicon Valley Bank (SVB) and the US debt fixed deposit rates ranging from 2.71% ceiling crisis.
Despite these incidents, the US to 2.94% across all tenures of 1-month to dollar remained favourable among investors as 12-month.

a safe-haven currency.

Furthermore, the rapid 110 Chapter 3.indd 110 Chapter 3.indd 110 05/10/2023 8:22 PM 05/10/2023 8:22 PM economic outlook 2024chapter 3 monetary and financial developments and large adjustments in US interest rates by 100 bps and expectations of future policy rate increases provided additional support to the US dollar.
Thus, the ringgit depreciated by 4.9% to close at RM4.6385 against the US dollar as at end-August, in tandem with other major and regional currencies which also declined against the greenback.
Banking Sector Performance Banking sector remains sound amid a more challenging operating environment The capital position of the banking system remains strong to withstand potential shocks Moving forward, in addition to Malaysia’s in the economy and provide sufficient credit to good economic fundamentals, expectations of the US Fed reaching the end of its hiking cycle and China’s economic recovery may provide support for the ringgit.
Since Malaysia adopts a flexible exchange rate regime, the value of the local currency will continue to be market-determined, and its performance will be influenced by global and domestic developments.

FIGURE 3.3.

Performance of Ringgit against Selected Currencies (% change) support economic activities.
The excess capital buffers1 stood at RM142.3 billion as at end-July 2023 while the Common Equity Tier 1 Capital (CET1), Tier 1 Capital, and Total Capital ratios remain stable at 15.1%, 15.6% and 18.8%, respectively, well above the Basel III minimum regulatory levels2.

Similarly, banks continued to maintain sufficient liquidity with a healthy Liquidity Coverage Ratio (LCR) of 154.8% and supportive of credit intermediation activities with a stable aggregate loan-to-fund ratio of 82%.
End-2022 – End-August 2023 The banks continued to set aside adequate 100 JAPANESE YEN CHINESE RENMINBI 100 KOREAN WON AUSTRALIAN DOLLAR 100 PHILIPPINE PESO 100 THAI BAHT SINGAPORE DOLLAR US DOLLAR EURO 100 INDONESIAN RUPIAH POUND STERLING provisions against potential credit losses, with total provisions including regulatory reserves of RM33.2 billion as at end-July.
Similarly, the loan loss coverage ratio (including regulatory reserves) remained at a prudent level of 115.8% of impaired loans, with total provisions accounting for 1.6% of total loans within the same period.

This was further supported by the assets quality of the banking system, which remained intact, where the net impaired loan ratio was steady at 1.1%.

The slight increase in impairments remains manageable amid the environment of uneven recovery, high input costs and rising cost of living.
-10 -5 0 5 10 Source: Bank Negara Malaysia 1 Excess total capital buffer refers to total capital above the regulatory minimum, which includes the capital conservation buffer (2.5% of risk-weighted assets – RWA) and bank-specific higher minimum requirements.

2 The Basel III minimum regulatory levels of CET1 Capital (4.5%), Tier 1 Capital (6%), and Total Capital ratios (8%), respectively, of RWA.
111 Chapter 3.indd 111 Chapter 3.indd 111 05/10/2023 8:22 PM 05/10/2023 8:22 PM economic outlook 2024chapter 3 monetary and financial developments FIGURE 3.4.
Banking System: Impaired Loans and Net Impaired Loans Ratio (End-period) RM billion 45 40 35 30 25 20 15 10 5 0 JMDSJMDSJMDSJMDSJM J1 % 4 3 2 1 0 IMPAIRED LOANS NET IMPAIRED LOANS RATIO (RIGHT SCALE) 1 End-July 2023 Source: Bank Negara Malaysia The banking sector maintained prudent lending activities amid tighter financial conditions during the first seven months of 2023.
As at end-July 2023, the growth in total loan outstanding moderated by 4.2% to RM2,056.3 billion mainly due to the slower growth in the business segment.

Meanwhile, segments and the high base effect in the second quarter of 2022. Financing to SMEs remained strong with the availability of various financing offered by the banking system, amounting to RM347.3 billion or 49.6% of total loans outstanding in the business segment.

TABLE 3.1.
Banking System: Loan Indicators1, January – July 2022 and 2023 RM BILLION CHANGE (%) 2022 2023 2022 2023 Total2 Loans applications 769.5 797.5 20.1 Loans approvals 386.4 413.6 26.7 Loans disbursements 1,319.2 1,388.0 15.5 Loans outstanding2,3 1,973.8 2,056.3 5.9 of which: Business Sector Loans applications 290.7 310.3 17.6 6.8 Loans approvals 163.2 183.5 18.0 12.4 Loans disbursements 928.1 933.0 15.9 Loans repayments 929.4 944.5 15.3 Loans outstanding3 698.4 700.1 5.4 0.5 1.6 0.2 of which: SMEs Loans applications 156.7 180.7 Loans approvals 80.1 95.0 8.7 9.2 15.4 18.5 3.6 7.0 5.2 6.4 4.2 2019 2020 2021 2022 2023 Loans repayments 1,311.9 1,396.0 13.2 financing activities in the banking system in Loans disbursements 277.9 291.7 32.7 all categories for both business and household Loans repayments 273.6 283.9 31.0 segments such as loan applications, approvals, Loans outstanding3 325.7 347.3 6.3 and disbursements expanded at a slower pace Households of 3.6%, 7%, and 5.2%, respectively.
Loans applications 454.2 466.0 20.5 Loans approvals 201.5 212.7 30.5 5.0 3.8 6.6 2.6 5.5 In the business segment, loan applications and Loans disbursements 237.1 266.4 23.7 12.4 approvals expanded by 6.8% to RM310.3 billion Loans repayments 231.1 265.8 11.9 15.0 and 12.4% to RM183.5 billion, respectively, following the expansion in economic activity.

However, the total loan outstanding slowed by 0.2% to RM700.1 billion due to slower growth in working capital loans.
Likewise, loan disbursements moderated by 0.5%, reflecting lower growth mainly in the commodity-related Loans outstanding3 1,163.1 1,226.0 6.2 5.4 1 Loans for all segments include data from the banking system and development financial institutions (DFIs) 2 Refer to the sum of outstanding business and household loans, and excludes loans to Government, financial institutions, non-bank financial institutions and other entities 3 As at end-period Note: Total may not add up due to rounding Source: Bank Negara Malaysia 112 Chapter 3.indd 112 Chapter 3.indd 112 05/10/2023 8:22 PM 05/10/2023 8:22 PM economic outlook 2024chapter 3 monetary and financial developments In the household segment, total loans outstanding grew by 5.4% as at end-July.
Household borrowings were mostly supported by continued demand for consumption- related credit, mainly for the purchase of residential properties and passenger cars.

Loan applications and approvals moderated to 2.6% and 5.5%, respectively.

Nonetheless, the volume of loan repayments of the segment continued to record double-digit growth, increasing further by 15% in the first seven months of 2023 supported by improvements in employment and income growth.
The strong performance was also backed by ongoing support from the banking system, which provided assistance such as rescheduling and restructuring of loans, and advisory support by Credit Counselling and Debt Management Agency (AKPK) to borrowers who face difficulties in meeting their repayment obligations.
Moving forward, the Second Financial Inclusion Framework (2023 – 2026), a four-year strategic roadmap launched in June 2023 will further advance financial inclusion by elevating the people’s financial well-being and standard of living.

This Framework complements the Financial Sector Blueprint 2022 – 2026 (FSBP) and takes into consideration new emerging growth angles in financial services and the aspirations of SDG and ESG propositions.
Household debt grew at a moderate pace of 5.1% as at June 2023, primarily driven by the purchase of residential properties facilitated by homeownership incentive programmes and the purchase of motor vehicles following the extension of the Sales Tax exemption3 and TABLE 3.2.
Banking System: Loans Outstanding by Sector, End-July 2022 and 2023 RM BILLION SHARE (%) 2022 2023 2022 2023 698.4 700.1 35.4 34.0 369.4 325.7 350.3 18.7 17.0 347.3 16.5 16.9 32.5 10.6 31.7 9.2 4.6 1.5 4.5 1.3 Businesses Non-SMEs1 SMEs Selected sectors Primary agriculture Mining and quarrying Manufacturing 131.1 126.6 18.8 18.1 Construction Electricity, gas and water supply Wholesale and retail trade Hotels and restaurants Transport and storage Information and communication Finance, insurance and business activities 89.1 23.3 89.7 12.8 12.8 21.2 3.3 3.0 141.0 145.0 20.2 20.7 19.6 19.4 2.8 2.8 29.0 30.9 4.2 4.4 19.5 22.0 2.8 3.1 170.0 171.2 24.3 24.5 Households of which: Purchase of residential properties Purchase of non-residential properties Purchase of passenger cars 1,163.1 1,226.0 58.9 59.6 705.8 755.2 60.7 61.6 80.3 80.8 6.9 6.6 162.1 175.4 13.9 14.3 Credit cards 35.5 40.3 Personal use 106.7 110.6 Purchase of securities Others 72.3 63.3 0.3 0.3 Other sectors 112.3 130.3 3.1 9.2 6.2 0.0 5.7 3.3 9.0 5.2 0.0 6.3 new vehicle registration period.
Despite the Total2 1,973.8 2,056.3 100.0 100.0 moderate pace of household debt growth, the debt-to-GDP ratio increased to 81.9% as at June due to the modest expansion in nominal GDP over the same period.
The bulk of household 1 Non-SMEs refer to large corporations, including foreign entities, other domestic entities, Government and others 2 Refer to the sum of outstanding business and household loans, and excludes loans to Government, financial institutions, non-bank financial institutions and other entities Note: Total may not add up due to rounding Source: Bank Negara Malaysia 3 The Sales Tax exemption was extended until June 2022, while new vehicle registration until March 2023.
113 Chapter 3.indd 113 Chapter 3.indd 113 05/10/2023 8:22 PM 05/10/2023 8:22 PM economic outlook 2024chapter 3 monetary and financial developments debt is intended for wealth accumulation which constituted 60.3% for residential properties, non-residential properties (5.5%), and investment in securities (4.5%).

Capital Market Performance Household financial resilience was supported by healthy debt servicing capacity and strong financial buffers.
The debt service ratios (DSRs) for outstanding and newly-approved loans remained sound owing to prudent debt underwriting standards.

Overall, the household financial assets4 totalled RM3,036 billion as at end-June and exceeded total household debt by 2.05 times.

With improvements in income and employment conditions, most borrowers have exited the repayment assistance programme and resumed loan payments.

These developments will augur well for household financial position.
The Ministry of Finance together with BNM and Securities Commission Malaysia (SC) are in the process of formulating the Consumer Credit Act (CCA) which will strengthen protection for credit consumers in Malaysia by providing a comprehensive regulatory framework for credit business and credit service business, ensuring proper conduct of entities carrying out such businesses and promoting a fair, efficient and transparent credit industry.
Through CCA, non-bank credit providers and credit service providers offering credit products or credit services such as Buy-Now- Pay-Later, leasing and factoring companies, debt collection agencies, impaired loan buyers and debt counselling and management agencies will be subjected to authorisation, governance and proper conduct requirements.
Regulated entities are expected to adhere to among others responsible lending practices, transparency and disclosure information and fair treatment of credit consumers.

These will strengthen consumer protection in Malaysia and heighten the level of professionalism within the industry.

Fundraising activities remain steadfast Gross funds raised in the capital market during the first seven months of 2023 rose by 11.4% to RM184.1 billion.
The commendable performance was attributed to increased fundraising activities by the public and private sectors, which grew by 10.8% and 12.4% to RM114 billion and RM70.1 billion, respectively.

The private sector’s gross funds raised through new corporate bonds grew by 11.8% to RM67.1 billion despite the tighter financing environment.

The funds were primarily raised via medium-term notes valued at RM65.3 billion, followed by straight bonds (RM1,005.8 million) and Islamic bonds (RM865.6 million).
Most of the funds were raised by finance, insurance, real estate, and business services accounting for 55.6%; electricity, gas and water (21.8%); and construction (9.3%) sectors.

These funds were primarily used to finance working capital, new projects and refinancing.

Meanwhile, funds raised via the domestic equity market during the same period recorded RM2.9 billion, with the growth driven by IPOs.
The new issuances under both Main and ACE markets comprise of consumer and industrial products and services, construction, technology, property and healthcare counters.

The increasing number of businesses planning to list in the near term will enhance investment opportunities and boost domestic equity market vibrancy.
For the public sector, Malaysian Government Securities (MGS) issuances increased by 8.3% to RM57.4 billion, while Malaysian Government Investment Issues (MGII) increased by 13.5% to RM56.6 billion.

The issuances take into consideration of the Government’s financial requirement and maturity profile.

Meanwhile, 4 Assets held by households including deposits, investments in unit trust and equities, insurance/takaful policies and Employee Provident Fund (EPF).
114 Chapter 3.indd 114 Chapter 3.indd 114 05/10/2023 8:22 PM 05/10/2023 8:22 PM economic outlook 2024chapter 3 monetary and financial developments foreign holdings of MGS and MGII outstanding stood at 36.6% and 10.2%, respectively, as at end-July.

Malaysia’s debt market continued to be supported by diverse group of institutional and foreign investors, complemented by the deep and liquid secondary bond market.

TABLE 3.3.
TABLE 3.3.

Funds Raised in the Capital Market, January – July 2022 and 2023 RM MILLION 2022 2023 The increase in gross funds raised in the capital market by the public and private sectors was primarily supported by economic recovery initiatives to boost economic growth.

With the implementation of various measures such as tax reform, access to credit, and additional stimulus packages, the public and private sectors have more opportunities to raise capital.
Additionally, foreign and domestic direct investments have increased significantly, thus unlocking more capital and creating more opportunities for investors to invest in a wide range of projects.

53,010.8 57,402.9 49,912.6 56,633.9 TABLE 3.4.
New Issuance of Corporate Bonds by Sector, January – July 2022 and 2023 Public Sector Government securities Malaysian Government Securities Malaysian Government Investment Issues New issues of debt securities 102,923.4 114,036.8 Less: Redemptions 47,478.8 58,370.0 Net funds raised by the public sector 55,444.6 55,666.8 Agriculture, forestry and fishing RM MILLION SHARE (%) 2022 2023 2022 2023 2,119.6 348.0 3.5 0.5 Private Sector Shares1/Warrants Initial Public Offers 2,265.7 2,912.3 Rights Issues Warrants - - - - New issues of shares/warrants 2,265.7 2,912.3 Debt securities2 Straight bonds 222.3 1,005.8 Convertible bonds - - Islamic bonds 453.1 865.6 Medium-term notes 59,382.9 65,267.3 Manufacturing 5,102.0 836.0 Construction 4,428.6 6,250.4 8.5 7.4 1.2 9.3 Electricity, gas and water Transport, storage and communication Finance, insurance, real estate and business services Government and other services Wholesale and retail trade, restaurant and hotels Mining and quarrying 9,520.3 14,632.2 15.9 21.8 2,100.0 2,785.5 3.5 4.1 31,747.3 37,358.2 52.9 55.6 4,270.5 4,535.8 7.1 6.8 270.0 392.5 0.4 0.6 500.0 0.0 0.8 0.0 New issues of debt securities 60,058.3 67,138.7 Total 60,058.3 67,138.7 100.0 100.0 Less: Redemptions 52,839.3 45,894.4 Net issues of debt securities 7,219.0 21,244.3 Net funds raised by the private sector 9,484.7 24,156.6 Total net funds raised 64,929.3 79,823.5 1 Excludes funds raised by the exercise of Employee Share Option Scheme, Transferable Subscription Rights, Warrants and Irredeemable Convertible Unsecured Loan Stocks 2 Excludes short-term papers in conventional and Islamic principles Note: Total may not add up due to rounding Source: Bank Negara Malaysia Note: Includes corporate bonds issued by Cagamas and non-resident corporations Total may not add up due to rounding Source: Bank Negara Malaysia During the first seven months of 2023, MGS and corporate bond yields broadly declined across all tenures.
The yields on 1-year, 3-year, 5-year, and 10-year MGS decreased by 2 bps, 18 bps, 26 bps, and 26 bps, respectively.

The decline in benchmark yields was mainly 115 Chapter 3.indd 115 Chapter 3.indd 115 05/10/2023 8:22 PM 05/10/2023 8:22 PM economic outlook 2024chapter 3 monetary and financial developments driven by market expectations of the policy rate reaching its peak.
This trend was also influenced by global macro developments, including easing inflationary expectations in the US, as well as the subdued global banking turmoil.

As at end-July, the 1-year, 3-year, 5-year and 10-year MGS yields closed at 3.24%, 3.49%, 3.60% and 3.83%, respectively.

FIGURE 3.5.
FIGURE 3.5.

Malaysian Government Securities Indicative Yields (End-period) % 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 JMDSJMDSJMDSJMDSJM J1 2019 2020 2021 2022 2023 10-YEAR 5-YEAR 3-YEAR 1-YEAR 1 End-July 2023 Source: Bank Negara Malaysia Meanwhile, the corporate bond yields on the 5-year AAA-rated, AA-rated and A-rated securities decreased by 42 bps, 42 bps and 10 bps, respectively.

However, BBB-rated corporate bond yield increased by 21 bps during the same period and closed at 7.01%.
Nonetheless, Malaysia’s BBB-rated corporate bond yield trended slightly higher driven by investors seeking corporate bonds with relatively safer credit ratings in light of risk-off sentiment following US banking distress.

Overall, the yield trend in the corporate debt market generally points towards the expectation of 116 FIGURE 3.6.
Share of Foreign Holdings in Total Malaysian Government Securities Outstanding (End-period) RM billion 600 500 400 300 200 100 0 M J S MD J S MD J J1 2021 2022 2023 TOTAL MALAYSIAN GOVERNMENT SECURITIES OUTSTANDING SHARE OF FOREIGN HOLDINGS (RIGHT SCALE) % 65 58 51 44 37 30 1 End-July 2023 Source: Bank Negara Malaysia FIGURE 3.7.
5-Year Corporate Bond Yields (End-period) % 12 10 8 6 4 2 JMDSJMDSJMDSJMDSJM J1 2019 2020 2021 2022 2023 BBB A AA AAA 1 End-July 2023 Source: Bank Negara Malaysia Chapter 3.indd 116 Chapter 3.indd 116 05/10/2023 8:22 PM 05/10/2023 8:22 PM economic outlook 2024chapter 3 monetary and financial developments lower interest rates, signalling lower borrowing FIGURE 3.8.

Performance of Bursa Malaysia costs, which will be an advantage to many businesses.
Billion 800 It is envisaged that local sukuk and bonds will play a vital role as the financing instruments for programmes and projects featured in the National Energy Transition Roadmap (NETR), the New Industrial Master Plan 2030 (NIMP 2030) and the Mid-Term Review of the Twelfth Malaysia Plan (MTR of the Twelfth Plan).
Overall, the outlook for MGS, MGII as well as corporate bonds and sukuk remains positive, buoyed by expectations of sustained economic growth, manageable inflation levels, and the anticipated conclusion of BNM’s rate hiking cycle this year.

Nonetheless, external factors such as the US Fed rate hike uncertainties, the banking sector turmoil and geopolitical tensions could pose as short-term market volatility risks.
The local equity market continued to be 600 400 200 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q31 2019 2020 2021 2022 2023 TOTAL TRANSACTION (UNITS) VALUE OF TRANSACTION (RM) COMPOSITE INDEX2 (RIGHT SCALE) 1 End-August 2023 2 As at end-period Source: Bursa Malaysia Points 2,200 2,000 1,800 1,600 1,400 1,200 affected by external challenges during the Switzerland.

Although early interventions first eight months of 2023.
In early 2023, the by the authorities managed to prevent the US Fed hinted of possible small interest rate incident from spreading to other financial hikes due to easing inflationary pressures.

institutions, investors were still cautious of the Meanwhile, China reopened its borders, giving potential contagion effect within the sector.

In hope of a positive global economic spillover.

May, the OPR was increased coincident with These factors improved risk sentiments but the US Fed’s decision.
Meanwhile, fears over were not sufficient to propel the FTSE Bursa the lingering US banking crisis, US debt ceiling Malaysia Kuala Lumpur Composite Index (FBM negotiations and Malaysia’s six-state election KLCI) to close the month at a higher level led to more defensive investment approach with the Index declining by 0.7% to 1,485.50 and profit-taking activities.

In addition, slower points as at end-January (end-December 2022: economic activity in Europe and weak domestic 1,495.49 points).
The lacklustre performance corporate earnings compounded these fears.

can be attributed to various factors including Consequently, the FBM KLCI closed lower at uncertainties surrounding global economic 1,387.12 points at the end of May.

growth which affected investor sentiment.


Effective 13 July, the Government reduced the The FBM KLCI decreased by 6.8% (year-to- stamp duty rate on shares traded on Bursa date) to close at 1,393.83 points on 14 March, Malaysia from 0.15% to 0.10% as one of the which was below the psychological level of measures to reinvigorate the domestic capital 1,400 points, as market sentiment was affected market.
The measure aims at increasing by the banking sector turmoil in the US and trading volumes and liquidity among retail 117 Chapter 3.indd 117 Chapter 3.indd 117 05/10/2023 8:22 PM 05/10/2023 8:22 PM economic outlook 2024chapter 3 monetary and financial developments TABLE 3.5.

Bursa Malaysia: Selected Indicators, End-August 2022 and 2023 investors, motivating SMEs to pursue IPOs due to the expedited listing process while encouraging foreign investors to participate in Malaysia’s stock market.
Consequently, the FBM KLCI recovered, to close higher at 1,459.43 Indices points as at end-July, buoyed by strong foreign buying interest and backing from local institutions as well as higher bargain-hunting activities.

The recovery was further supported by the launching of the Ekonomi MADANI framework.
The market sentiment continued to improve, supported by foreign buying interest and impending policy announcements with FBM KLCI FBM EMAS FBM 100 FBM SCAP FBM ACE Total turnover1 2022 2023 1,512.05 1,451.94 10,697.65 10,740.70 10,449.43 10,412.03 14,380.26 16,072.89 4,910.44 5,217.97 the index rising to close at 1,462.03 points on Volume (million units) 489,373.45 559,605.08 9 August.
Subsequently, with improved local job openings data and stimulus measures announced by China, the FBM KLCI ended the month to close at 1,451.94 points.
Likewise, Value (RM million) 363,183.71 340,020.02 Average daily turnover1 Volume (million units) 3,020.82 3,475.81 the accumulated net equity inflows for July and Value (RM million) 2,241.87 2,111.93 Market capitalisation (RM billion) 1,706.31 1,776.33 Total number of listed companies Main Market ACE Market LEAP Market Market liquidity Turnover value/market capitalisation (%) Market concentration 10 highest capitalised stocks/market capitalisation (%) 764 156 46 773 167 48 21.3 19.1 34.1 33.0 1 Based on market transactions and direct business transactions between January and August Source: Bursa Malaysia August recorded RM1,555 million.
FIGURE 3.9.
Performance of Selected Stock Markets (% change) End-2022 – End-August 2023 US (NASDAQ) JAPAN VIET NAM REPUBLIC OF KOREA INDIA US (DOW JONES) INDONESIA CHINA (SHANGHAI) UK SINGAPORE MALAYSIA PHILIPPINES THAILAND HONG KONG -10 -5 0 Source: Bloomberg 118 Chapter 3.indd 118 Chapter 3.indd 118 05/10/2023 8:22 PM 05/10/2023 8:22 PM economic outlook 2024chapter 3 monetary and financial developments information box 3.1 Key Capital Market Measures Several key measures were undertaken by the Securities Commission Malaysia (SC) and Bursa Malaysia in the first eight months of 2023 to enhance the liquidity and efficiency of Malaysia’s capital market.
The measures are as follows: 3-Jan 16-Feb 17-Mar Amendments to Business Rules and Listing Requirements Business Rules and Listing Requirements were amended, effective 10 January 2023, to facilitate continued operations on non-gazetted holidays.

On such holidays, Bursa Malaysia will ensure all transactions can and will be delivered and settled as scheduled.
Launching of New Data Connectivity Services Bursa Connectivity Services was launched as a universal connectivity solution allowing global users access to Bursa’s data pool quickly and seamlessly, which enables users to create new financial products, analyse trading opportunities and meet the growing demand of investors.
Bursa Carbon Exchange’s Inaugural Carbon Auction Bursa Carbon Exchange (BCX), the world’s first Shariah-compliant carbon exchange, successfully carried out the nation’s inaugural carbon credit auction on 16 March 2023.

The BCX enables the trading of standardised contracts with Verra-registered carbon credits from climate-friendly projects and solutions, which corporates can use to offset their emission footprint and meet climate goals.
The BCX will also facilitate engagements between the public and private sectors toward developing conducive policies to support the emerging voluntary carbon market.

31-Mar 27-Mar 22-Mar New Transfer of Listing Framework from LEAP Market to ACE Market The ACE Market Listing Requirements were amended to facilitate eligible LEAP Market-listed corporations to graduate to the ACE Market and further increase the accessibility and attractiveness.
With these amendments, SMEs will have better access to the capital market and provide a clearer roadmap for LEAP companies aiming to list on the ACE Market.

Enhancement of Listing Requirements to Facilitate Offering of Islamic REITs and ETFs with Waqf Feature The Main Market Listing Requirements were enhanced to facilitate the offering of listed Islamic Real Estate Investment Trusts (REITs) and Exchange-traded Funds (ETFs) with the Waqf feature effective 3 April 2023.
These enhancements will promote the growth of Waqf and Sustainable and Responsible Investment (SRI) assets, further bolstering Bursa’s position as a leading global Islamic finance marketplace.

Commencement of Centralised Sustainability Platform (Platform) Bursa Malaysia, in collaboration with the London Stock Exchange Group, has developed and tested the Platform that will serve as a repository for listed companies’ ESG disclosures.
The Platform will enable Malaysian corporates to meet regulatory requirements as well as facilitate greater transparency and consistency in sustainability disclosures.

It will also assist banks to develop green financing products and services, incentivising and encouraging decarbonisation of the corporate sector and their supply chain.
10-Apr 18-Apr 12-June Memorandum of Understanding (MoU) to Develop Capital Market Graduate Programme (CMGP) Ministry of Higher Education and SC signed an MoU to develop CMGP, which aims to improve the knowledge and employability of 9,000 public and private university graduates to address shortage of skilled manpower in the capital market industry.

The three-year programme is partially funded through the Capital Market Development Fund.
New E-Payment Platform (e-PATH) Beginning 1 May 2023, e-PATH was introduced to provide an efficient, secure and effortless way for market participants and the public to make online payments to SC, such as application fees for IPOs, transfers of listing, as well as takeovers and mergers.
Expansion of Approved Securities Criteria Criteria for Approved Securities were expanded by reducing the daily market capitalisation requirement from RM500 million to RM200 million to allow investors manage their portfolios while boosting market vibrancy in Securities Borrowing and Lending, and short-selling activities.
29-Aug 27-June 19-June Widens Access, Offers More Choices in Fund Management In line with measures to liberalise the fund management industry, SC introduced the Foreign Exempt Scheme (FES) framework, providing high-net-worth entities and institutional investors greater onshore access to foreign investment funds.
The SC also introduced flexibility to wholesale fund managers seeking to invest in alternative investment products beyond conventional assets, such as securities, derivatives, money market instruments and deposits.

These measures are to enhance the depth and breadth of the capital market.
FIKRA ACE to Spur Islamic Fintech Innovation, Growth for ICM The FIKRA ACE, an enhanced version of Islamic fintech accelerator programme was launched to enable companies with fintech solutions to nurture, grow, and connect with the Islamic Capital Market (ICM) ecosystem by facilitating the development of Islamic fintech through a structured approach.

The programme consists of three components, namely FIKRA ACE - Accelerator, FIKRA ACE - Circle and FIKRA ACE - Excel.
Measures to Boost Capital Market Vibrancy and Competitiveness The Honourable Prime Minister announced short- and medium-term measures to drive Malaysia’s economic growth and capital market competitiveness, among others, reducing the stamp duty rate for the trading of listed shares from 0.15% to 0.10% and promoting corporate venturing to drive greater domestic direct investment.
119 Chapter 3.indd 119 Chapter 3.indd 119 05/10/2023 8:22 PM 05/10/2023 8:22 PM economic outlook 2024chapter 3 monetary and financial developments Islamic Banking and Capital Market Performance a frontier in addressing sustainability goals through Shariah-compliant financing that balances social and environmental needs with economic development.

Islamic banking and capital market thrive amid resilient economic growth TABLE 3.6.
Islamic Banking: Key Indicators1, End-July 2022 and 2023 Islamic banking continues to support economic and social needs in line with principles of value-based finance via diverse and innovative Shariah-compliant solutions.

As at end-July 2023, the total assets of Islamic banking5 expanded by 8.1% to RM1,293.2 billion, accounting for 36.4% of the market share.
Meanwhile, the total Islamic financing outstanding grew by 9.1% to RM844.1 billion as at end-July which outpaced the growth trend in the conventional banking sector.

The demand for household financing remained strong, accounting for the largest share of 63.1% of the total financing, mainly for residential properties and passenger cars.

The outlook for Islamic banking remains promising, supported by a mature ecosystem that promotes social and financial inclusion.
This ecosystem encapsulates regulations enacted by the Islamic Financial Services Act 2013 [Act 759], diversified and innovative products and services, resilient industry players, progressive digitalisation strategy as well as strong foundation in value-based intermediation (VBI) financing.
In addition, Malaysia’s strong commitment to the social finance agenda is reflected in the anticipated 3rd cohort of the Value-based Intermediation Financing and Investment Impact Assessment Framework (VBIAF) Sectoral Guides6 to be released by the year-end that integrates ESG risk considerations in financing and investment decisions.
The integration of VBI and social finance will further position the nation as RM BILLION CHANGE (%) 2022 2023 2022 2023 995.1 1,081.4 6.3 774.1 844.1 12.0 8.7 9.1 Assets Financing Primary agriculture 16.2 20.9 -2.6 23.1 Mining and quarrying 3.0 3.2 -35.3 -29.1 Manufacturing 36.0 33.7 4.6 Electricity, gas and water supply Wholesale and retail trade, restaurants and hotels 11.8 8.5 94.1 42.7 54.0 18.2 17.8 Construction 43.3 44.6 34.3 Real estate 31.8 35.3 1.5 22.7 27.5 24.3 -4.0 3.6 -3.5 10.3 21.0 Transport, storage and communication Finance, insurance and business activities Education, health and others 46.4 35.9 21.5 11.7 16.3 8.4 -41.4 14.2 Households 491.3 532.7 11.8 9.0 Others Liabilities Deposits and Investment Account 12.4 39.3 118.4 17.5 923.8 1,001.0 869.3 934.8 6.4 8.8 8.4 7.5 Investment 0.3 0.3 -22.1 -11.7 Savings Demand 75.1 71.6 134.9 132.7 Investment account 133.5 142.9 5.5 16.3 17.6 -4.6 -1.6 7.1 Others 525.5 587.3 5.5 11.8 1 Excluding DFIs Note: Total may not add up due to rounding Source: Bank Negara Malaysia 5 Includes DFIs.
6 This framework is a continuation from the 1st and 2nd cohort Sectoral Guides issued in 2021 and 2022 covering palm oil, renewable energy, energy efficiency, oil & gas, construction and infrastructure and manufacturing sectors.

The 3rd cohort covers agriculture, mining & quarrying, road transportation and waste management.
120 Chapter 3.indd 120 Chapter 3.indd 120 05/10/2023 8:22 PM 05/10/2023 8:22 PM economic outlook 2024chapter 3 monetary and financial developments information box 3.2 An update: Bolstering Islamic Finance in Malaysia The Evolution of Islamic Finance in Malaysia Islamic finance has progressed significantly in Malaysia over the last four decades.

It has undergone three broad phases of development and evolved into one of the most developed Islamic finance ecosystems globally as depicted in Figure 3.2.1.
The solidification of the industry is the culmination of efforts from the Government, financial regulators, and industry players, which have continued to pursue a multi-pronged approach towards sustaining and sharpening Malaysia’s proposition as a global leader in Islamic finance.
These efforts include providing a conducive and enabling legal and regulatory environment; advancing structural reforms that address market frictions and industry competitiveness; as well as enhancing the dynamism of institutions and talent.

FIGURE 3.2.1.
Phases of Development and Current Ecosystem in Islamic Finance Early Phases of Islamic Finance Building foundation Mainstreaming Driving diversification and innovation Financial Sector Masterplan 2001 – 2010 Financial Sector Blueprint 2011 – 2020 Strategic Intents Current Strategic Thrusts of Islamic Financial Sector and Capital Market Financial Sector Blueprint 2022 – 2026 Advance value-based finance through Islamic finance leadership Capital Market Masterplan 3, 2021 – 2025 Shaping a stakeholder economy with SRI and ICM A B C Sharpen Malaysia’s proposition as an international gateway for Islamic finance Strengthen policy enablers of value-based finance for greater impact Mainstream social finance Relevant to broader halal MSMEs Facilitate access for MSMEs in the halal economy Relevant to environment Relevant to society Empower investors and businesses that are responsible and sustainable Enable socio-economic development of the nation, leveraging Islamic social finance 121 Chapter 3.indd 121 Chapter 3.indd 121 05/10/2023 8:22 PM 05/10/2023 8:22 PM economic outlook 2024chapter 3 monetary and financial developments Islamic Finance Ecosystem in Malaysia Growing market share Global recognition Islamic financing1 Islamic deposits and investment accounts (IA)1 44.7% 2018: 36.6% 41.6% 2018: 35.4% Financing Deposit and IA Takaful fund assets2 Takaful net contribution Enabling and comprehensive ecosystem 13.7% 2018: 10.5% 24.8% 2018: 19.7% Fund assets Net contribution Enabling regulatory and legal frameworks (e.g.
CBA, IFSA, Shariah standards, and Shariah governance framework) Host to key global Islamic finance infrastructures (e.g.

IFSB, IILM) Vibrant talent ecosystem serving global Islamic finance needs Shariah-compliant market infrastructures (e.g.
BSAS6, BM-i7) Deep capital market Diverse players offering wide range of services Global and domestic sukuk 40.3% Largest market share in global sukuk outstanding USD800 mil 63.7% 66.3% 79.3% World’s first sovereign US dollar sustainable sukuk Sukuk market share out of total domestic bonds/sukuk outstanding Islamic equities Shariah market capitalisation out of total market capitalisation Shariah-compliant securities out of total securities listed and traded Development financial institutions3 Retakaful operators 3 6 Training and education entities >68 Takaful operators 16 Banking institutions3 29 >60 Ancillary services (e.g.
legal, Shariah firms) 574 Islamic fund managers5 Note: 1 Includes Development Financial Institutions (DFIs) 2 Not inclusive of the shareholders’ fund assets 3 Inclusive of Islamic windows of commercial and investment banks 4 As of Dec 2022 5 Inclusive of Islamic windows of fund managers 6 Bursa Suq Al-Sila` (BSAS) is a commodity trading platform specifically dedicated to facilitate Islamic liquidity management and financing by Islamic financial institutions 7 Bursa Malaysia-i (BM-i) is a fully integrated Islamic securities exchange platform with a comprehensive range of exchange related facilities, that incorporate Shariah-compliant features Source: Bank Negara Malaysia, Securities Commission Malaysia and Bursa Malaysia Strengthening the value and impact of Islamic finance Under the framework of Ekonomi MADANI, Islamic finance is envisioned to intermediate more diverse forms of capital that contribute to an inclusive and just economic system.
Islamic finance in Malaysia is called upon to not just embrace the value of Halal but also embrace the value of the Tayyib principle.

This aspiration aligns closely with the intrinsic values of Shariah applied in Islamic finance as outlined in Figure 3.2.2. that are intended to promote a balanced distribution of wealth, eradicate poverty, foster collaboration and encourage sustainable development.

These values are universal and can shape a more sustainable and inclusive financial system in Malaysia.
122 Chapter 3.indd 122 Chapter 3.indd 122 05/10/2023 8:22 PM 05/10/2023 8:22 PM economic outlook 2024chapter 3 monetary and financial developments FIGURE 3.2.2.
Shariah Principles underpinning Islamic Finance Development Eﬀort Economic growth that is balanced, progressive, sustainable and inclusive Prevention of harm and attainment of benefits Fairness and self-drive for best quality (ihsan) Profit comes through accepting and sharing risk Money is only a store of value and medium of exchange Wealth creation must be balanced with wealth transfer and circulation Profit comes through Assurance of transparency and traceability accepting and sharing risk Source: Bank Negara Malaysia Shariah Compliance Strategies under Financial Sector Blueprint 2022 – 2026 are aligned with Ekonomi MADANI Aspirations The Financial Sector Blueprint 2022 – 2026 (FSBP) sets out visions for financial sector development to ensure the sector is agile, dynamic and resilient to support the transition of the nation to its next stage of development.
The Blueprint consists of five strategic thrusts, where one of the thrusts, “advance value-based finance through Islamic finance leadership”, envisions a financial system that can deliver tangible socio-economic impact and ultimately demonstrate the values and full potential of Islamic finance, including realising Maqasid Shariah1.

The thrust encapsulates three main strategies, namely: i. Sharpen Malaysia’s proposition as an international gateway for Islamic finance; ii.
Strengthen policy enablers of value-based finance for greater impact; and iii.

Mainstream social finance.

As Malaysia aims to strengthen its role as a global gateway for Islamic finance markets in Asia and Organisation of Islamic Cooperation (OIC) countries, the Blueprint outlines key strategic priorities that will build upon the strength of the industry’s ecosystem.

These strategic priorities are further supported by concerted efforts and initiatives by various stakeholders in the ecosystem.
These initiatives include reviewing regulatory frameworks to spur innovation, developing a strong and sustainable pool of quality talent, pursuing scalable and impactful pilot programmes in collaboration with industry as well as partnering with global stakeholders as depicted in Figure 3.2.3.

1 Maqasid Shariah means the objective of Shariah, the deeper meanings and inner aspects of wisdom considered by the lawgiver in all or most of the areas and circumstances of legislation.
(The Malaysian Islamic Financial Market Report 2023, Bank Negara Malaysia) 123 Chapter 3.indd 123 Chapter 3.indd 123 05/10/2023 8:22 PM 05/10/2023 8:22 PM economic outlook 2024chapter 3 monetary and financial developments FIGURE 3.2.3.

Key Development Priorities and Industry Players Initiatives Key development priorities in the FSBP 2022 – 2026 Ecosystem-wide initiatives Sharpen Malaysia’s proposition as an international gateway for Islamic finance i.
Strengthen gateway-critical capabilities in Malaysia’s Islamic financial industry ii.

Promote greater industry leadership iii.
Facilitate further deepening of Malaysia’s Islamic financial and capital markets • Formation of MIFC Leadership Council (MLC) provides a collaborative platform for the industry to drive MIFC priorities • Pioneering a global network of Shariah scholars known as the Centralised Shariah Advisory Authorities (CSAA) to strengthen global connectivity and foster mutual respect on Shariah views • Formation of Islamic Financial Market Subcommittee (IFMC) to formulate and implement strategies on Islamic financial market Strengthen policy enablers of value-based finance for greater impact i.
Develop a more conducive regulatory environment to facilitate the application of diverse Shariah contracts ii.

Support the industry’s innovation efforts in developing new value-based business models, solutions, and practices iii.

Facilitate greater stakeholder activism through higher quality disclosures • Intermediated RM302.2 billion in VBI-aligned initiatives between 2017 and 2021 (16% share out of total key product segments – i.e.
financing, investment, deposit and investment account) • Collaboration on value-based solutions pilot programmes in mainstreaming value-based finance • Modernising Shariah contract-based regulatory framework to spur innovation Mainstream social finance i. Elevate social finance as an integral part of the Islamic finance ecosystem • Innovation using Islamic social finance concepts e.g.
myWakaf, myZakat, iTEKAD (blended finance programme for low-income microentrepreneurs) • Over RM65.2 million has been distributed under the Islamic social finance tools from October 2020 until September 2021 Source: Bank Negara Malaysia, AIBIM Value-based Intermediation (VBI) Preview Report 2017 – 2020 and Full Report 2021 (based on member banks’ submission), ICD ‒ Refinitiv Islamic Finance Development Indicator Report 2022 The Malaysia International Islamic Financial Centre (MIFC) Leadership Council (MLC), established by Bank Negara Malaysia (BNM) and Securities Commission Malaysia (SC) in October 2022 serves as an important enabler to position Malaysia as a global marketplace and international gateway for Islamic finance.
The MLC as an industry-led platform is guided by the aspirations outlined in the FSBP and the Capital Market Masterplan 3 (CMP3).

The Council which comprises ten prominent local and international industry figures has since actively engaged the industry players and key partners, as well as participated in various domestic and international platforms as part of its strategic and advocacy roles in advancing Islamic finance and its impact creation.
As part of its immediate priorities, MLC will strive to unlock impactful innovations and collaboration towards delivering outcomes in positioning Malaysia as the preferred Islamic fundraising and investment destination, addressing inequality, advancing sustainability, elevating relevant human capital and knowledge initiatives in Islamic finance as well as strengthening digital empowerment.
Value-based Intermediation (VBI) is one of the key catalysts towards developing a more balanced, progressive, sustainable and inclusive financial system.

VBI aims to deliver the intended outcomes of Shariah that generate positive and sustainable impacts on the economy, community and environment.

Since the introduction of VBI in 2017, the Islamic finance industry has facilitated a total of RM302.2 billion in VBI-aligned initiatives.
Presently, efforts are also directed towards facilitating innovative value-based solutions that support wider intermediation of capital and support the digital transformation of the financial sector.

The announcement of two Islamic digital banks2 in 2022 and intensification of digitalisation efforts undertaken by existing Islamic banks will further enhance access to affordable and quality financial solutions, particularly for the underserved and unserved market segments.
Furthermore, greater 2 In 2022, BNM announced the five successful applicants for the digital bank licences of which two are licensed under the Islamic Financial Services Act 2013 (IFSA).

The successful applicants will undergo a period of operational readiness.
124 Chapter 3.indd 124 Chapter 3.indd 124 05/10/2023 8:22 PM 05/10/2023 8:22 PM economic outlook 2024chapter 3 monetary and financial developments digitalisation in the takaful sector, propelled by the Licensing and Regulatory Framework for Digital Insurers and Takaful (DITO), also presents opportunities to reduce critical protection gaps in Malaysia.

Ongoing efforts are being undertaken to facilitate innovative value-based solutions that support the wider intermediation of capital.
In supporting implementation towards SDG, social finance is also envisioned to play a greater role in complementing public sector finance, commercially-driven financial solutions, and corporate social responsibility (CSR) activities of financial institutions to promote greater social resilience.

This goal is pursued by incorporating instruments such as zakat, waqf, and sadaqah as integral parts of Islamic financial products and services.
For example, iTEKAD, a blended social finance programme introduced in 2020, provides financial and non-financial components in the form of seed capital, microfinance, and structured training.

The programme targets low-income segment of aspiring and existing microentrepreneurs.

The iTEKAD has expanded to include 11 participating banks which have onboarded more than 3,000 participants while mobilising over RM40 million of diverse social finance funds (donations, social impact investment, and zakat) in 2023.
The key performance indicators of VBI and iTEKAD are listed in Figure 3.2.4.

FIGURE 3.2.4.
Key Performance Indicators of VBI and iTEKAD VBI Total funds intermediated by Islamic Financial Institutions (IFIs) RM146.6 billion between 2020 to 2021 RM155.6 billion between 2017 to 2020 iTEKAD Key Performance1 11 2020: 1 >50 2020: 2 participating financial institutions >300 2020: 57 micro-entrepreneurs enrolled implementation partners >RM40 mil 2020: RM0.04 mil total social finance funds mobilised Channelled towards Key Impact1 12.2% of deposit and investment account balance is VBI-related.
Worth about RM48.7 billion 18.0% of financing balance is VBI-related.

Worth about RM82.6 billion Over 27,000 financing accounts for affordable housing.

Worth over RM5 billion About 42,000 financing accounts for green financing.

Worth over RM7.1 billion Over 123,000 financing accounts for financing to SMEs and micro-SMEs.

Worth over RM51 billion Over 4,400 financing accounts for financing for education.

Worth over RM5 billion Over 1,500 public infrastructure financing accounts.
Worth over RM3.9 billion 21.6% of investments are VBI-related.

Worth over RM15.2 billion Nearly 200 projects of value-added services were professionally managed.

Worth nearly RM103 million Over 193,000 recipients of Islamic social finance funds.

Worth over RM65 million 62.3% of Islamic social finance recipients received zakat.

Worth over RM36 million 71.5% of zakat recipients fall under the category of ﬁ sabililläh (for education).
Worth nearly RM17 million Business growth >40% generated average monthly sales of more than RM4,000 Employment >70% retained at least one employee Financial resilience >70% saved on average up to RM4,000 of business income per month Digital upskilling >90% conduct online sales and marketing and make business transactions through e-payments Note: 1Figures are as of August 2023 and derived from sample of iTEKAD participants Source: Bank Negara Malaysia, participating financial institutions of iTEKAD, AIBIM Value-based Intermediation 2021 Full Report Conclusion Collectively, the efforts undertaken thus far will further advance Malaysia’s Islamic finance system and strengthen the nation’s position as a prominent leader in the global Islamic economy.
The culmination of efforts from the Government, particularly through BNM and SC, alongside various stakeholders in the industry is poised to boost the value proposition of Islamic finance.

In addition, Malaysia is widely recognised as a global thought leader in this domain.
Hence, the nation is well-positioned to spearhead in charting the future of Islamic finance, given the rapidly evolving financial and economic landscapes while striking a balance between economic development and the social agenda, in line with the aspirations of Ekonomi MADANI.
125 Chapter 3.indd 125 Chapter 3.indd 125 05/10/2023 8:22 PM 05/10/2023 8:22 PM economic outlook 2024chapter 3 monetary and financial developments The Islamic Capital Market (ICM) continues to lead Malaysia’s capital market in fundraising and investing.

As at end-July, the domestic size of ICM was valued at RM2,402.2 billion, accounting for 64.4% of total capital market size.

Furthermore, the size of ICM increased further by 7.9% with the sukuk market becoming more attractive to investors.
During the first seven months, sukuk issuances amounted to RM178.2 billion or 61.7% of total issuances.

The increasing demand from the private sector for Shariah-compliant instruments continues to fuel the issuances of sukuk.

The total corporate sukuk issuances reached RM50.9 billion, representing 75.6% of overall corporate bonds and sukuk issued in Malaysia during the same period.

Malaysia continued to record the largest share of global sukuk outstanding at 38.8% as at end-July.
Recognised as the pioneer in the global sukuk market, Malaysia has a well-established Islamic finance infrastructure and sukuk issuances with diverse tenures and structures.

FIGURE 3.10.

Global Sukuk Outstanding by Country (% share) Malaysian sukuk have often been considered attractive attributed to competitive yields and a reputation for strong regulatory oversight.
Additionally, Malaysia’s efforts to become a hub for Islamic finance have garnered interest from foreign institutional investors in diversifying investment portfolios.

However, global sukuk issuances are likely to rise slowly in 2023 amid slower growth and market volatility but will remain a key funding source in core Islamic finance markets.
Meanwhile, the medium- to long-term outlook is expected to be positive amid sustained Islamic investors’ demand, issuer refinancing needs, and government support in core markets.

Bursa Malaysia continues to promote Shariah- compliant securities products.

As at end-July, a total of 807 or 81.8% out of the total of 987 public listed companies are Shariah-compliant.
The market capitalisation of Shariah-compliant securities stood at RM1,142.9 billion or 65.1% of the overall total market capitalisation of listed companies on Bursa Malaysia.
8.7% 3.6% 35.4% 15.7% 6.9% USD 746.5 billion End-2022 17.4% 38.8% USD 759.8 billion End-July 2023 3.0% 12.9% 6.9% 29.6% 21.1% MALAYSIA SAUDI ARABIA UNITED ARAB EMIRATES INDONESIA TURKIYE OTHERS1 MALAYSIA SAUDI ARABIA UNITED ARAB EMIRATES INDONESIA TURKIYE OTHERS1 1 Others include Bahrain, Bangladesh, Brunei, Egypt, France, Gambia, Hong Kong, Ireland, Ivory Coast, Jordan, Kuwait, Luxembourg, Maldives, Morocco, Nigeria, Oman, Qatar, Senegal, Singapore, South Africa, UK and US Note: Total may not add up due to rounding Source: Bank Negara Malaysia 126 Chapter 3.indd 126 Chapter 3.indd 126 05/10/2023 8:22 PM 05/10/2023 8:22 PM economic outlook 2024chapter 3 monetary and financial developments The Malaysian capital market is expected to remain resilient and supportive of the economy, buoyed by strong macroeconomic fundamentals, high domestic liquidity, and a well-developed infrastructure.
The Capital Market Masterplan 3 (CMP3) seeks to make the capital market even more relevant to the economic development of Malaysia and its stakeholders by 2025.

The goal is to achieve an efficient and effective capital market that channels capital into productive sectors as well as fosters diversity and competition.
Towards this end, the SC continues to focus its efforts on raising domestic investors’ digital savviness and positioning fintech to promote solutions in the halal economy, Sustainable and Responsible Investment (SRI) and Islamic social finance.

Conclusion Monetary policy will remain conducive to sustainable economic growth amid price stability.
Financial intermediation activities continue to remain robust backed by positive growth prospects and a stable labour market with the availability of credit remains forthcoming.

Likewise, the capital market is projected to remain resilient in line with a favourable domestic growth outlook.

The NETR, NIMP 2030 and MTR of the Twelfth Plan guided by the Ekonomi MADANI framework are among policies that will advance Malaysia into a better future.
Along with the Government’s announcement on measures to revitalise the capital market, the domestic financial market is poised to strengthen further and contribute more significantly towards the nation’s wealth and prosperity.

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Bursa Carbon Exchange successfully completes Malaysia’s inaugural carbon auction.
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pdf?1679028940 Bursa Malaysia.

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Bursa Malaysia commences centralised sustainability platform.
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Bursa Malaysia enhances listing requirements to facilitate offering of Islamic REITs and ETFs with waqf feature.

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Bursa Malaysia introduces new transfer of listing framework from LEAP Market to ACE Market.
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SC’s FIKRA ACE to spur Islamic fintech innovation, growth for ICM.

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(2023d, August 29).

SC widens access, offers more choices in fund management.

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bursamalaysia.com/about_bursa/media_ centre/bursa-malaysia-expands-approved- securities-criteria-to-boost-market-vibrancy Bursa Malaysia.

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SC- Bursa Malaysia measures to boost capital market vibrancy and competitiveness.

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com/sites/5bb54be15f36ca0af339077a/ content_entry5c11a9db758f8d31544574c6/ 649000665b711a176fd3fafe/files/ June19_2023_SC-Bursa_Measures_To_ Boost_Capital_Market_Vibrancy_And_ Competitiveness.pdf?1687161434 Securities Commission.

(2023a, April 10).

Ministry of Higher Education and Securities Commission Malaysia ink MoU to develop Capital Market Graduate Programme.
https:// www.sc.com.my/resources/media/media- release/ministry-of-higher-education-and- securities-commission-malaysia-ink-mou-to- develop-capital-market-graduate-programme Chapter 3.indd 129 Chapter 3.indd 129 05/10/2023 8:22 PM 05/10/2023 8:22 PM 129 economic outlook 2024chapter 3 monetary and financial developments Chapter 3.indd 130 Chapter 3.indd 130 05/10/2023 8:22 PM 05/10/2023 8:22 PM statistical tables Statistical Tables 2.
Statistical Table Combine BI 2024.indd 131 05/10/2023 8:38 PM 131 economic outlook 2024 2.

Statistical Table Combine BI 2024.indd 132 05/10/2023 8:38 PM LIST OF STATISTICAL TABLES statistical tables Table No.

I. Socioeconomic Indicators Selected Socioeconomic Statistics II.

International Economy Key Economic Data of Selected Countries III.
Macroeconomy National Accounts Gross Domestic Product by Kind of Economic Activity at Constant 2015 Prices Index of Services Industrial Production Index Gross National Income by Demand Aggregates Private Consumption Indicators Private Investment Indicators External Sector Malaysia’s Trade with Major Trading Partners External Trade Indices Production, Exports Volume and Value of Major Primary Commodities Direction of Major Exports Exports of Manufactured Goods Source of Major Imports Balance of Payments Prices Consumer Price Index by Region Consumer Price Index by Stratum Consumer Price Index by State Core Index Producer Price Index - Local Production Labour Market Labour Force Employment by Industry Active Registrants Vacancies and Placements IV.
Financial and Capital Markets Interest Rates Key Exchange Rates Commercial Banks: Loans Outstanding by Purpose and Sector Government and Corporate Bond Yields Bursa Malaysia: Selected Indicators Islamic Banks: Loans Outstanding by Purpose and Sector V. Sustainable Development Goals Progress on Sustainable Development Goals by Indicator 2.
Statistical Table Combine BI 2024.indd 133 05/10/2023 8:38 PM economic outlook 2024 STATISTICAL ANNOTATION The Statistics Appendix provides time series data on the key economic variables.

Each table contains current selected economic data.

Percentage changes are provided for important variables as an indication of economic trends.

In addition, percentage of totals and footnotes are also provided where necessary.
The sum of the component figures may not be tally with the subtotal or total due to rounding.

In some series, historical figures have been revised.

Estimates for 2023 are based on six to eight months data and forecasts for 2024 have been provided where appropriate.

Unless otherwise stated, the source of data is from the Ministry of Finance, Malaysia.
Poverty Line Income (PLI) Malaysia’s poverty line income was first developed in 1977 by introducing a basket of minimum basic needs to support the life of the whole household.

Cost estimates are made based on expenditure on items in this basket which include the minimum basic needs of food and non-food.

This assessment of basic needs results in a minimum income level known as Poverty Line Income (PLI) which is the ringgit value required by a household to meet life necessities.
The calculation of PLI method was updated in 2005 whereby the food necessity in food PLI are determined based on minimum requirements of energy/ calorie taken by each household based on the food pyramid and balanced eating practices by the World Health Organization (WHO) and Recommended Dietary Allowance (RDA).

This is to ensure that household members can live a healthy and active life in society.
The minimum amount of calories, by gender and age, will be converted to macronutrients and adjusted with items and prices in the PLI food basket.

Meanwhile, the necessity for non-food PLI is determined by actual expenditure based pattern of low- income households in Malaysia, which includes expenditure on clothing, housing, transport and other non-food necessities.
The non-food PLI measurement also considers the economies of scale factor in household’s expenditure and the price changes by state, urban and rural areas.

In 2019, a review of the 2005 methodology was implemented.

Elements in food and non-food necessities are improved along with the latest commodity prices.
The optimum minimum and balanced needs for each household are the basis for food items, while for non-food items, which refer to the B20 expenditure pattern are readjusted based on current costs of basic needs.

A total of 146 items have been selected for non-food needs which include housing, clothing, health, education, transportation, telecommunications and personal care items.

Based on the result of the conducted review, the PLI setting methodology has been improved in three aspects.
First, food PLI setting concept that has been updated from minimum requirements to optimum minimum requirements.

Second, the PLI food basket item setting takes into account the quality improvement based on Recommendation Nutrient Intake (RNI) and Food Pyramid, on the back of the Malaysian Dietary Guidelines, in line with daily physical activity and healthy life.
Third, for non- food PLI, the necessity item of the lowest 20 percent income household group (B20) has increased to 146 items to from 106 items in 2019.

134 2.

Statistical Table Combine BI 2024.indd 134 05/10/2023 8:38 PM economic outlook 2024statistical tables statistical tables Acronyms and Abbreviations STATISTICAL ANNOTATION NPISHs US ASEAN EMDEs IMF GDP FBM-KLCI MSIC SITC PT3 PMR SRP LCE SPM MCE STPM MHSC n.a.

cont’d n.e.c.

etc.
Non-profit institutions serving households United States Association of Southeast Asian Nations Emerging Market and Developing Economies International Monetary Fund Gross Domestic Product Financial Times Stock Exchange (FTSE) Bursa Malaysia Kuala Lumpur Composite Index Malaysia Standard Industrial Classification Standard International Trade Classification Pentaksiran Tingkatan 3 Penilaian Menengah Rendah Sijil Rendah Pelajaran Lower Certificate of Education Sijil Pelajaran Malaysia Malaysian Certificate of Education Sijil Tinggi Pelajaran Malaysia Malaysian Higher School Certificate Not available Continued Not elsewhere classified et cetera 2.
Statistical Table Combine BI 2024.indd 135 05/10/2023 8:38 PM 135 economic outlook 2024 136 2.

Statistical Table Combine BI 2024.indd 136 05/10/2023 8:38 PM economic outlook 2024statistical tables statistical tables 1.1.
SELECTED SOCIOECONOMIC STATISTICS Malaysia Indicator 2019 2020 2021 202210 202311 Demographic Statistics Population1 (‘000) Total Male Female Sex ratio2 Population density (per square kilometre) Dependency ratio (%) Total3 Young age4 Old age5 Life expectancy at birth1 Total Male Female Education n.a.
n.a.

n.a.
2018 2019 2020 2021 2022 Primary school enrolment rate6 (%) Secondary school enrolment rate7 (%) 97.9 91.1 98.1 92.5 98.2 92.4 98.3 92.5 98.7 93.5 Higher education institutions enrolment8 1,343,830 1,323,449 1,224,098 1,207,593 1,202,202 Pupil-teacher ratio Primary schools Secondary schools Literacy rate9 (%) 11.6 12.0 95.9 11.6 11.0 96.0 12.0 11.0 96.3 12.3 11.5 96.4 12.3 11.3 96.5 1 Year 2020 to 2023: Current Population Estimates based on the 2020 Population and Housing Census 2 The number of males per 100 females 3 The ratio of the number of persons aged 0–14 years and 65 years and above to the number of persons aged 15–64 years 4 The ratio of the number of persons aged 0–14 years to the number of persons aged 15–64 years 5 The ratio of the number of persons aged 65 years and above to the number of persons aged 15–64 years 6 Percentage of school aged children between 6+ and 11+ years at primary level in Government and private schools 7 Percentage of school aged children between 12+ and 16+ years at secondary level in Government and private schools 8 Includes public university, private higher education institutions, polytechnic and community college 9 Aged 15 years and above with formal education, excluding non-Malaysian citizens 10 Preliminary 11 Estimate 137 2.
Statistical Table Combine BI 2024.indd 137 05/10/2023 8:38 PM economic outlook 2024 1.1.
SELECTED SOCIOECONOMIC STATISTICS (cont’d) Malaysia Indicator 2018 2019 2020 2021 2022 Health Population per doctor 530 482 441 420 412 Official beds strength in public sector12 46,611 46,988 48,305 49,781 49,981 Information Technology Mobile-cellular penetration rate per 100 inhabitants (%) Mobile-broadband penetration rate per 100 inhabitants (%) Infrastructure 130.2 135.4 133.6 142.1 145.3 113.0 123.7 118.7 126.4 131.0 Rural electricity coverage (% of housing unit) 96.4 97.0 97.4 97.5 97.8 Electricity index 116.3 119.9 115.7 118.6 122.9 Poverty Structure13 Incidence of absolute poverty (% of households) Total Urban Rural Incidence of relative poverty (% of households) Total Urban Rural Comprising Ministry of Health (MOH) hospitals (includes special medical institutions) and non-MOH Hospitals (university hospitals and military hospitals) 13 Based on Household Income and Basic Aminities Survey Starting 2019, data is based on 2019 methodology Poverty Line Income (PLI) Source: Department of Statistics, Malaysia; Malaysian Communications and Multimedia Commission; Ministry of Education; Ministry of Higher Education; Ministry of Health and Ministry of Rural Development Malaysia 138 2.
Statistical Table Combine BI 2024.indd 138 05/10/2023 8:38 PM economic outlook 2024statistical tables statistical tables 2.1.
KEY ECONOMIC DATA OF SELECTED COUNTRIES Real GDP (% Growth) GDP Per Capita1 (USD) Consumer Price Index (%) Unemployment Rate2 (%) Current Account Balance (USD billion) Gross International Reserves (USD billion) Exports3 (USD billion) Imports4 (USD billion) Advanced Economies 2020 2021 2022 20235 20246 United States 2020 2021 2022 20235 20246 Euro Area 2020 2021 2022 20235 20246 Singapore 2020 2021 2022 20235 20246 Republic of Korea 2020 2021 2022 20235 20246 Japan 2020 2021 2022 20235 20246 EMDEs 2020 2021 2022 20235 20246 -4.2 5.4 2.7 1.5 1.4 -2.8 5.9 2.1 1.8 1.0 -6.1 5.4 3.5 0.9 1.5 -3.9 8.9 3.6 1.5 2.1 -0.7 4.3 2.6 1.4 2.4 -4.3 2.2 1.0 1.4 1.0 -1.8 6.9 4.0 4.0 4.1 52,240.3 57,491.0 62,924.9 65,891.3 68,023.4 63,577.3 70,159.8 76,348.5 80,034.6 82,131.5 – – – – – -0.2 2.3 6.1 5.8 3.5 0.5 2.5 5.1 3.5 2.3 0.0 - – – – – – 125.5 435.2 -258.4 13.3 179.5 -619.7 -846.4 -925.6 -728.8 -689.9 209.5 337.6 -102.3 83.0 144.1 57.3 76.4 90.2 79.9 80.6 75.9 85.2 29.8 37.1 50.4 147.9 197.3 90.0 131.8 180.3 156.2 325.7 582.7 146.8 19.4 – – – – – 14,137.8 13,909.9 17,214.5 16,861.3 18,823.5 19,039.7 19,487.8 19,397.0 20,410.0 20,131.6 145.8 251.6 – – – – – – – – 362.3 417.9 289.5 – – 443.1 463.1 423.2 – – 1,440.2 1,448.1 1,272.7 – – – – – – – 1,424.9 1,754.3 2,064.3 – – 3,488.3 4,160.7 4,378.4 – – 362.5 457.4 515.8 – – 512.5 644.4 683.6 – – 641.3 756.0 746.9 – – 2,406.9 2,935.3 3,375.8 – – 3,121.9 3,713.1 4,320.8 – – 329.8 406.2 475.6 – – 467.6 615.1 731.4 – – 635.5 769.0 897.2 – – 8,226.3 7,896.8 10,701.6 10,093.6 12,290.1 11,395.7 12,094.9 11,719.5 12,721.4 12,430.6 139 2.
Statistical Table Combine BI 2024.indd 139 05/10/2023 8:38 PM economic outlook 2024 2.1.
KEY ECONOMIC DATA OF SELECTED COUNTRIES (cont’d) Real GDP (% Growth) GDP Per Capita1 (USD) Consumer Price Index (%) Unemployment Rate2 (%) Current Account Balance (USD billion) Gross International Reserves (USD billion) Exports3 (USD billion) Imports4 (USD billion) China 2020 2021 2022 20235 20246 India 2020 2021 2022 20235 20246 ASEAN-57 2020 2021 2022 20235 20246 Indonesia 2020 2021 2022 20235 20246 Malaysia 2020 2021 2022 20235 20246 2.2 8.4 3.0 5.2 4.5 -5.8 9.1 7.2 6.1 6.3 -4.4 4.0 5.5 4.6 4.5 -2.1 3.7 5.3 5.0 5.0 - -1.2 2.5 3.3 ~ 4.012 4.0 – 5.0 12,332.3¹¹ 2.5 – 3.0 13,051.4¹¹ 2.1 – 3.6 4.2 4.0 4.2 4.1 3.9 – – – – – – – – – – 7.1 6.5 5.9 5.3 5.2 4.5 4.6 3.9 3.5 3.4 248.8 317.3 417.6 272.5 232.6 24.0 -38.7 -88.4 -81.6 -89.3 99.5 77.5 78.9 83.4 90.0 -4.4 3.5 13.2 -3.8 -11.1 14.1 14.5 12.5 3.010 13.8 3,536.0 3,606.2 3,466.8 – – 588.4 635.3 564.7 – – – – – – – 135.9 144.9 137.2 – – 107.6 116.9 114.6 112.59- – 2,590.0 3,358.2 3,593.5 – – 276.4 395.4 453.4 – – – – – – – 163.3 231.5 292.0 – – 234.6 299.3 351.9 208.18 334.2 2,066.0 2,686.7 2,716.2 – – 373.2 573.1 720.4 – – – – – – – 141.6 196.2 237.4 – – 190.7 238.2 293.7 174.18 281.4 ¹ Expressed in current USD price except for Advanced Economies, EMDEs and ASEAN-5 (Purchasing Power Parity (PPP) dollars per person) ² Composites for the country groups are averages of national unemployment rates weighted by labour force in the respective countries ³ Expressed in Exports of Merchandise only except for Advanced Economies, EMDEs and ASEAN-5 (Exports of Merchandise and Services) 4 Expressed in Imports of Merchandise only except for Advanced Economies, EMDEs and ASEAN-5 (Exports of Merchandise and Services) 5 Estimate 6 Forecast 7 Indonesia, Malaysia, the Philippines, Thailand and Viet Nam
 8 As at August 2023 9 As at 30 August 2023 10 As at June 2023 ¹¹ USD rate is the average for period of January to August 2023 at RM4.4944/USD.
Data is sourced from BNM Monthly Statistical Bulletin (August 2023) 12 Approximate Sources: International Monetary Fund (IMF), World Economic Outlook (April and July 2023); IMF Database; World Trade Organization Trade Statistics; Department of Statistics; Bank Negara Malaysia and Ministry of Finance, Malaysia 140 2.

Statistical Table Combine BI 2024.indd 140 05/10/2023 8:38 PM economic outlook 2024statistical tables statistical tables 3.1.
GROSS DOMESTIC PRODUCT BY KIND OF ECONOMIC ACTIVITY at constant 2015 prices, Malaysia RM million Kind of Economic Activity 2020 2021 20222 20233 20244 Agriculture Mining and quarrying Manufacturing Construction Services Utilities 99,109 (-2.4) 92,879 (-9.7) 307,606 (-2.7) 53,616 (-19.3) 777,693 (-5.2) 37,950 (-1.0) 99,000 (-0.1) 93,717 (0.9) 336,839 (9.5) 50,889 (-5.1) 794,552 (2.2) 39,025 (2.8) 99,073 (0.1) 96,199 (2.6) 364,131 (8.1) 53,441 (5.0) 881,310 (10.9) 40,337 (3.4) Wholesale and retail trade 228,561 (-5.8) 233,144 (2.0) 264,511 (13.5) Food & beverages and accommodation Transportation and storage Information and communication Finance and insurance Real estate and business services Other services1 Government services (+) Import duties GDP at purchasers’ prices 36,539 (-26.7) 42,078 (-21.5) 89,203 (5.9) 96,102 (2.9) 58,766 (-14.5) 63,795 (-10.1) 124,699 (5.0) 15,346 (-5.2) 32,731 (-10.4) 42,653 (1.4) 94,639 (6.1) 43,547 (33.0) 55,799 (30.8) 99,576 (5.2) 105,839 (10.1) 106,667 (0.8) 53,088 (-9.7) 61,950 (-2.9) 131,484 (5.4) 15,646 (2.0) 65,143 (22.7) 67,714 (9.3) 138,015 (5.0) 16,785 (7.3) 99,620 (0.6) 95,448 (-0.8) 369,359 (1.4) 56,824 (6.3) 930,125 (5.5) 41,676 (3.3) 279,976 (5.8) 48,072 (10.4) 63,863 (14.5) 104,531 (5.0) 105,310 (-1.3) 69,920 (7.3) 72,059 (6.4) 144,717 (4.9) 17,868 (6.5) 100,770 (1.2) 98,030 (2.7) 384,727 (4.2) 60,688 (6.8) 981,990 (5.6) 43,900 (5.3) 295,685 (5.6) 51,853 (7.9) 68,598 (7.4) 111,274 (6.5) 109,841 (4.3) 73,663 (5.4) 75,658 (5.0) 151,519 (4.7) 18,873 (5.6) 1,346,249 (-5.5) 1,390,644 (3.3) 1,510,939 (8.7) 1,569,247 (~ 4.0)5 1,645,078 (4.0 – 5.0) 1 Owner occupied dwellings, community, social and personal services, private non-profit services to households and domestic services of households 2 Preliminary 3 Estimate 4 Forecast 5 Approximate Note: Figures in parentheses are annual percentage changes Source: Department of Statistics and Ministry of Finance, Malaysia 141 2.
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INDEX OF SERVICES 2015 = 100, Malaysia Weights (%) 2019 2020 2021 2022 20231 Annual Change (%) Services 100.0 6.4 -7.9 1.6 14.4 6.9 Wholesale & retail trade, food & beverages and accommodation Wholesale and retail trade Food and beverages Accommodation Business services and finance Finance and insurance Professional, scientific & technical and administrative & support services Real estate Information & communication and transportation & storage Information and communication Transportation and storage Other services Arts, entertainment & recreation and personal services & other activities Private education Private health 1 January to June 2023 Source: Department of Statistics, Malaysia 45.2 37.9 5.7 1.6 26.8 16.0 7.2 3.6 21.9 12.9 9.0 6.1 2.6 1.9 1.6 6.6 6.1 -9.6 -6.1 0.5 2.3 10.2 -20.4 -8.3 17.2 14.3 24.3 7.3 6.7 2.7 6.8 6.1 4.6 9.3 5.2 6.5 6.5 6.5 6.3 7.9 4.9 5.5 -49.8 -25.2 140.7 43.5 -4.0 2.6 -10.3 2.6 9.9 -6.7 9.3 1.0 4.5 0.0 22.2 13.6 -17.9 -12.8 -5.4 5.7 -22.5 -21.8 5.0 6.5 1.8 -8.7 -41.3 -28.1 -7.5 -6.7 -5.6 7.6 31.1 14.1 5.1 33.7 19.7 52.9 7.3 9.5 5.6 7.8 3.7 14.9 11.7 14.6 10.5 10.2 142 2.
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INDUSTRIAL PRODUCTION INDEX 2015 = 100, Malaysia Subsector Total Industrial Production Mining Electricity Manufacturing Export-oriented industries Manufacture of vegetable and animal oils and fats Manufacture of textiles Manufacture of wearing apparel Manufacture of wood and products of wood and cork, except furniture; manufacture of articles of straw and plaiting materials Manufacture of coke and refined petroleum products Manufacture of chemicals and chemical products Manufacture of rubber products Manufacture of plastics products Weights (%) 100.00 25.14 6.61 68.25 45.82 3.71 0.58 0.60 1.44 9.36 6.37 2.22 2.26 Manufacture of computer, electronics and optical products 13.89 Manufacture of electrical equipment Manufacture of machinery and equipment n.e.c.
Manufacture of furniture Domestic-oriented industries Manufacture of food processing products Manufacture of beverages Manufacture of tobacco products Manufacture of leather and related products Manufacture of paper and paper products Printing and reproduction of recorded media Manufacture of basic pharmaceuticals, medicinal chemical and botanical products Manufacture of other non-metallic mineral products Manufacture of basic metals Manufacture of fabricated metal products, except machinery and equipment Manufacture of motor vehicles, trailers and semi-trailers Manufacture of other transport equipment Other manufacturing Repair and installation of machinery and equipment 1 January to July 2023 Source: Department of Statistics, Malaysia 2.20 2.14 1.04 22.44 3.68 0.65 0.52 0.15 1.15 0.93 0.38 2.97 2.35 3.79 3.17 1.19 0.74 0.76 statistical tables 2019 2020 2021 2022 20231 Annual Change (%) 2.4 -1.3 3.1 3.6 2.9 -1.4 4.4 6.1 4.9 2.7 1.8 6.8 2.9 2.9 3.4 3.5 8.1 5.0 6.8 2.8 5.8 5.1 4.3 4.2 4.2 4.5 4.0 3.7 7.0 4.8 5.3 3.9 -4.1 -8.9 -3.5 -2.7 -0.7 -3.9 -13.2 -11.4 -12.1 7.4 1.5 2.5 9.5 11.6 -8.4 13.3 1.6 9.2 -10.6 11.6 -7.1 48.9 2.1 2.5 0.9 1.1 -7.0 -6.6 4.9 -14.5 9.4 23.2 12.1 15.6 12.2 11.6 -3.7 5.0 10.1 9.9 -16.0 -12.4 -17.9 -2.9 -5.1 11.5 14.9 3.1 14.5 15.7 1.0 2.8 6.3 0.8 2.8 2.6 -14.3 -4.8 -15.5 -1.7 -13.2 -7.6 -8.5 6.7 2.2 3.6 8.2 7.0 -1.8 4.3 2.1 6.7 6.3 4.1 -16.9 2.8 16.0 9.7 7.0 9.5 10.9 8.7 13.3 22.1 25.6 7.5 6.8 6.1 9.1 6.8 7.1 25.6 7.0 9.9 -0.1 10.2 1.2 0.3 1.6 1.4 0.0 5.5 -3.8 5.8 -6.5 1.1 4.3 -9.6 -5.5 0.6 0.2 0.8 -8.7 4.6 4.1 0.5 17.6 8.5 3.3 5.5 1.9 3.2 3.1 6.2 5.8 3.6 2.6 5.4 143 2.
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GROSS NATIONAL INCOME BY DEMAND AGGREGATES Malaysia RM million Type of Expenditure 2020 2021 20223 20234 20245 Current Prices A.

Final consumption expenditure Public Private 183,869 196,941 208,887 213,063 221,165 865,450 897,573 1,031,759 1,111,748 1,204,270 B.
Gross fixed capital formation Public1 Private 74,405 67,130 72,330 79,856 88,271 222,259 231,308 253,939 269,856 290,016 C. Changes in inventories and valuables2 -17,816 43,974 94,811 46,912 31,317 D. Exports of goods and services 873,477 1,093,895 1,378,452 1,272,424 1,345,773 E. F. Imports of goods and services 783,152 981,922 1,248,820 1,143,757 1,206,785 Gross Domestic Product at purchasers’ prices (A+B+C+D-E) 1,418,491 1,548,898 1,791,358 1,850,102 1,974,027 G. Balance of primary income -28,520 -42,153 -59,414 -47,119 -58,490 H. Gross National Income (F+G) 1,389,971 1,506,745 1,731,944 1,802,983 1,915,537 Constant 2015 Prices A.
Final consumption expenditure Public Private 179,721 191,268 199,943 201,904 207,132 802,747 817,756 908,974 960,111 1,014,649 B.
Gross fixed capital formation Public1 Private 70,522 62,674 65,985 71,423 77,380 210,653 216,308 231,830 241,708 254,724 C. Changes in inventories and valuables2 -4,464 19,060 21,465 10,475 2,986 D. Exports of goods and services 830,157 984,094 1,126,661 1,056,379 1,099,226 E. Imports of goods and services 743,087 900,516 1,043,918 972,752 1,011,020 F. Gross Domestic Product at purchasers’ prices (A+B+C+D-E) 1,346,249 1,390,644 1,510,939 1,569,247 1,645,078 G. Balance of primary income -13,783 -19,567 -31,320 -24,978 -30,464 H. Gross National Income (F+G) 1,332,466 1,371,077 1,479,619 1,544,269 1,614,614 1 Includes investment of public corporations 2 Includes statistical discrepancy arising from balancing 3 Preliminary 4 Estimate 5 Forecast Source: Department of Statistics and Ministry of Finance, Malaysia 144 2.
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PRIVATE CONSUMPTION INDICATORS Malaysia Indicator 2019 2020 2021 2022 2023 Imports of consumption goods1 (RM million) 74,155 74,134 83,893 104,017 67,021² Bursa Malaysia (end-period) FBM–KLCI 1,588.76 1,627.21 1,567.53 1,495.49 1,451.94³ Market capitalisation (RM billion) 1,711.84 1,817.29 1,789.20 1,736.21 1,776.33³ Sales number (units) Passenger cars Motorcycles 550,179 479,647 452,486 641,773 384,600⁴ 546,813 498,327 497,262 680,749 429,5945 Production of televisions (‘000 units) 9,935 12,229 15,072 15,978 7,809⁴ Outstanding balance of credit card (RM million, end-period) Banking system’s consumption credit (RM million, end-period) 41,192 36,056 35,982 41,310 42,8323 296,276 305,039 311,319 332,123 348,9023 1 Refers to imports by broad economic categories published by the Department of Statistics, Malaysia 2 January to August 2023 3 End-August 2023 4 January to July 2023 5 January to September 2023 Source: Bank Negara Malaysia; Bursa Malaysia; Department of Statistics, Malaysia; Malaysian Automotive Association;- and Motorcycle & Scooter Assemblers and Distributors Association of Malaysia 2.
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PRIVATE INVESTMENT INDICATORS Malaysia Indicator 2019 2020 2021 2022 2023 Imports (RM million) Capital goods1 100,179 90,733 103,823 120,231 78,169³ Intermediate goods1 467,211 429,190 545,801 706,551 399,416³ Loan disbursements by banking system (RM million) Manufacturing Construction 258,602 253,200 378,577 490,706 289,6083 90,046 77,782 110,379 149,403 112,4753 Housing loans (RM million, end-period) Government2 Banking system 80,675 89,980 96,602 102,871 106,2164 604,847 647,883 689,219 736,916 770,0475 Production of construction materials Cement roofing tiles ('000 units) 43,484 47,874 37,054 39,760 24,4016 Ready-mixed concrete ('000 cubic metres) 34,067 34,841 35,425 37,696 22,3796 Iron and steel bars and rods ('000 metric tonnes) 1,404 1,296 708 931 6466 Sales of commercial vehicles (units) 54,108 48,543 56,397 78,885 45,2076 1 Refers to imports by broad economic categories published by the Department of Statistics, Malaysia 2 Based on principal amount 3 January to August 2023 4 End- July 2023 5 End-August 2023 6 January to July 2023 Source: Bank Negara Malaysia, Department of Statistics Malaysia, Malaysian Automotive Association and Public Sector Home Financing Board 146 2.
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MALAYSIA’S TRADE WITH MAJOR TRADING PARTNERS RM million 2019 RM million 2020 RM million 2021 RM million 2022 20231 RM million share (%) RM million share (%) Total Trade 1,844,483 1,784,308 2,228,366 2,843,821 100.0 1,717,509 100.0 Exports Imports Net Total Trade Exports Imports Net 995,072 983,827 1,241,022 1,550,009 849,411 800,481 987,344 1,293,811 54.5 45.5 935,217 782,293 145,661 183,345 253,678 256,198 – 152,924 316,598 331,440 421,491 486,381 100.0 140,931 159,223 192,475 210,554 175,667 172,217 229,016 275,826 -34,735 -12,994 -36,541 -65,272 43.3 56.7 – Total Trade 226,574 215,824 267,607 367,524 100.0 Exports Imports Net 137,078 142,146 173,974 232,484 89,497 47,581 73,678 68,467 93,633 80,341 135,040 97,444 63.3 36.7 – Total Trade 165,220 178,785 216,971 267,629 100.0 Exports Imports Net 96,542 68,678 27,863 109,080 142,244 167,208 69,705 39,376 74,727 67,517 100,421 66,788 62.5 37.5 – Total Trade 129,592 124,142 149,759 181,734 100.0 104,042 100.0 Total China Singapore United States Japan Taiwan Indonesia Thailand Republic of Korea Hong Kong Australia Exports Imports Net Total Trade Exports Imports Net Total Trade Exports Imports Net Total Trade Exports Imports Net Total Trade Exports Imports Net Total Trade Exports Imports Net Total Trade Exports Imports Net -16,947 -18,232 65,998 63,594 2,403 94,077 37,032 57,046 62,561 61,581 981 91,907 33,874 58,033 75,816 73,942 1,874 98,658 83,076 15,582 54.3 45.7 – 115,828 157,748 100.0 40,625 75,203 51,745 106,003 -20,014 -24,160 -34,579 -54,258 70,226 31,328 38,898 -7,570 100,595 56,318 44,277 12,042 73,058 34,230 38,828 -4,599 80,688 66,624 14,064 52,561 51,770 28,448 23,322 5,126 66,283 29,589 36,694 -7,106 79,640 45,339 34,300 11,039 80,826 34,714 46,113 95,307 39,180 56,127 97,546 52,162 45,383 6,779 88,308 38,224 50,084 -11,399 -11,860 82,363 68,167 14,196 53,971 44,046 24,359 19,687 4,672 94,343 76,706 17,637 59,069 57,041 34,479 22,562 11,917 32.8 67.2 – 43.0 57.0 – 129,704 100.0 55,736 73,968 121,959 100.0 65,774 56,186 9,588 53.9 46.1 – 114,093 100.0
 54,906 59,187 -4,280 48.1 51.9 – 113,271 100.0 95,671 17,601 78,070 88,728 48,091 40,637 7,453 84.5 15.5 – 100.0 54.2 45.8 – 1 January to August 2023 Source: Department of Statistics, Malaysia and Malaysia External Trade Development Corporation 54.5 45.5 – 100.0 42.8 57.2 – 100.0 61.7 38.3 – 100.0 65.3 34.7 – 288,506 123,604 164,902 -41,298 241,782 149,111 92,671 56,439 160,287 104,665 55,623 49,042 56,932 47,110 9,823 82,922 27,843 55,079 -27,237 73,153 33,151 40,002 -6,851 75,141 39,573 35,568 4,005 71,759 37,047 34,712 2,336 67,375 58,328 9,048 49,280 56,865 33,669 23,196 10,473 54.7 45.3 – 100.0 33.6 66.4 – 100.0 45.3 54.7 – 100.0 52.7 47.3 – 100.0 51.6 48.4 – 100.0 86.6 13.4 – 100.0 59.2 40.8 – 147 2.
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EXTERNAL TRADE INDICES 2010 = 100, Malaysia Commodity Section Weights1 (%) 2019 2020 2021 2022 20232 Annual Change (%) Export Unit Value Indices Total Food Beverages and tobacco Crude materials, inedible Mineral fuels, lubricants, etc.
Animal and vegetable oils and fats Chemicals Manufactured goods Machinery and transport equipment Miscellaneous manufactured articles 100.0 3.5 0.6 2.7 16.1 6.0 7.8 9.7 42.3 10.9 Miscellaneous transactions and commodities 0.4 Import Unit Value Indices Total Food Beverages and tobacco Crude materials, inedible Mineral fuels, lubricants, etc.
Animal and vegetable oils and fats Chemicals Manufactured goods Machinery and transport equipment Miscellaneous manufactured articles Miscellaneous transactions and commodities 100.0 6.8 0.6 3.3 12.9 1.1 10.5 13.4 41.8 7.6 2.0 0.8 2.5 7.5 -0.7 0.1 -9.7 -0.7 -2.8 2.5 2.2 -5.1 -0.3 2.5 2.7 -0.3 -10.1 -12.0 0.3 0.4 1.7 0.4 -2.5 3.4 3.5 -0.6 -24.9 22.5 0.5 -1.1 1.1 0.7 -8.2 -3.0 2.3 1.7 0.4 -27.0 15.1 -0.6 -0.3 -0.9 -0.1 10.2 23.6 10.2 17.2 3.8 3.5 7.2 34.2 48.1 6.3 5.1 1.8 1.8 11.4 3.9 2.3 1.6 10.7 25.8 48.5 2.6 4.6 -1.3 0.2 2.6 4.3 4.4 2.9 60.0 18.6 7.7 4.5 10.3 1.0 78.4 10.0 2.8 1.1 1.3 56.3 44.6 0.5 1.9 4.8 2.4 4.8 0.4 3.6 3.1 -1.0 1.6 -27.4 0.9 -0.3 6.6 0.2 41.1 0.5 1.7 0.1 -0.7 -1.8 -9.2 -1.7 -0.8 2.8 1.5 -1.6 1 Weights based on values of Malaysia imports and exports of merchandise during 2015 2 Annual changes was calculated based on monthly unit value indices of January to August 2023 Source: Department of Statistics, Malaysia 148 2.
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PRODUCTION, EXPORTS VOLUME AND VALUE OF MAJOR PRIMARY COMMODITIES Malaysia Major Commodities 2019 2020 2021 2022 20231 Palm oil Production (‘000 tonnes) Volume (‘000 tonnes) Value (RM million) Natural rubber Production (‘000 tonnes) Volume (‘000 tonnes) 19,858 17,429 39,128 640 631 19,141 16,214 45,647 515 565 18,117 14,835 64,615 470 653 11,570 14,905 82,480 216 621 9,692² 9,426 38,455 161² 368 Value (RM million) 3,773 3,286 4,568 4,592 2,328 Crude petroleum Volume (‘000 tonnes) Value (RM million) Liquefied natural gas (LNG) Volume (‘000 tonnes) Value (RM million) 1 January to August 2023 2 January to July 2023 12,452 26,346 25,498 42,484 13,095 18,843 24,083 29,868 8,901 8,921 6,113 18,372 31,847 18,074 24,697 38,193 27,316 68,002 17,582 38,965 Source: Bank Negara Malaysia, Department of Statistics, Malaysia and Malaysia External Trade Development Corporation 2.
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DIRECTION OF MAJOR EXPORTS Malaysia Exports ‘000 tonnes Electrical and Electronics (E&E) 2019 2020 2021 2022 20231 RM million share (%) ‘000 tonnes RM million share (%) ‘000 tonnes RM million share (%) ‘000 tonnes RM million share (%) ‘000 tonnes RM million share (%) Total 373,118 100.0 386,292 100.0 455,953 100.0 380,685 100.0 Singapore United States China Hong Kong European Union Non-E&E Total Singapore China United States European Union Indonesia Palm oil Total India China European Union Turkiye Kenya Natural rubber Total China European Union United Arab Emirates United States India Crude petroleum Total Australia Thailand India Japan Brunei Liquefied natural gas (LNG) Total Japan China Republic of Korea Thailand Taiwan 1 January to August 12.9
Source: Department of Statistics, Malaysia and Malaysia External Trade Development Corporation 150 2.
Statistical Table Combine BI 2024.indd 150 05/10/2023 8:38 PM economic outlook 2024statistical tables 2019 2020 2021 2022 20231 RM million share (%) ‘000 tonnes RM million share (%) ‘000 tonnes RM million share (%) ‘000 tonnes RM million share (%) ‘000 tonnes RM million share (%) statistical tables Total Exports ‘000 tonnes Electrical and Electronics (E&E) Non-E&E Total Palm oil Total Singapore United States China Hong Kong European Union Singapore
 China United States European Union Indonesia European Union India China Turkiye Kenya Natural rubber Total China European Union United Arab Emirates United States India Crude petroleum Total Liquefied natural gas (LNG) Australia Thailand India Japan Brunei Total Japan China Republic of Korea Thailand Taiwan 1 January to August Source: Department of Statistics, Malaysia and Malaysia External Trade Development Corporation 2.
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EXPORTS OF MANUFACTURED GOODS Malaysia RM million 2019 2020 2021 2022 20232 Electrical and electronics products (E&E) 373,118 386,292 455,953 592,956 380,685 Petroleum products 71,511 61,889 96,206 161,205 96,500 Chemical and chemical products 57,477 50,736 70,683 80,579 46,965 Manufactures of metal 41,490 36,830 61,557 63,551 37,579 Machinery, equipment and parts 41,599 39,446 49,922 60,409 36,461 Optical and scientific equipment 39,905 42,220 46,928 56,632 35,564 Palm oil-based manufactured products 23,338 21,006 32,704 41,385 20,849 Iron and steel products 21,961 23,552 29,409 33,827 20,127 Rubber products Processed food 25,841 44,302 64,615 28,790 13,983 21,773 21,283 24,600 28,414 19,067 Transport equipment 19,143 18,460 15,914 18,988 11,172 Wood products 15,777 16,084 16,555 18,096 9,455 Textiles, apparels and footwear 15,531 13,951 15,827 17,341 10,548 Manufactures of plastics 14,978 13,187 15,971 17,262 10,458 Non-metallic mineral products 9,079 8,346 10,572 11,945 8,097 Paper and pulp products 6,405 6,363 8,516 9,948 7,238 Jewellery 6,974 4,157 5,804 7,395 4,988 Beverages and tobacco 3,452 2,593 2,495 2,757 2,038 Other manufactures¹ 31,233 38,801 44,201 53,190 28,849 share (%) 47.5 12.1 5.9 4.7 4.6 4.4 2.6 2.5 1.7 2.4 1.4 1.2 1.3 1.3 1.0 0.9 0.6 0.3 3.6 Total 840,586 849,498 1,068,431 1,304,668 800,624 100.0 1 Includes animal feed, printed matter, miscellaneous manufactured articles, etc 2 January to August 2023 Note: Total may not add up due to rounding Source: Department of Statistics, Malaysia 152 2.
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SOURCE OF MAJOR IMPORTS Malaysia RM million Imports 2019 2020 2021 2022 20231 share (%) share (%) share (%) share (%) share (%) Electrical and Electronic (E&E) Total 245,538 100.0 253,000 100.0 314,546 100.0 393,474 100.0 227,356 100.0 China Taiwan 64,090 26.1 68,025 26.9 91,244 29.0 110,095 28.0 62,837 27.6 40,497 16.5 42,649 16.9 51,815 16.5 76,704 19.5 41,350 18.2 United States 27,180 11.1 30,413 12.0 32,658 10.4 42,278 10.7 19,526 8.6 Chemicals and chemical products Total China 81,589 100.0 74,296 100.0 96,551 100.0 115,514 100.0 69,381 100.0 13,976 17.1 13,882 18.7 21,718 22.5 28,611 24.8 16,328 23.5 European Union 11,094 13.6 9,540 12.8 12,175 12.6 12,982 11.2 8,628 12.4 Singapore 7,695 9.4 6,705 9.0 8,971 9.3 9,704 8.4 6,988 10.1 Petroleum products Total 77,480 100.0 60,007 100.0 89,546 100.0 145,639 100.0 89,113 100.0 Singapore 29,334 37.9 17,453 29.1 26,759 29.9 51,051 35.1 29,258 32.8 China 10,506 13.6 7,643 12.7 12,400 13.8 18,356 12.6 14,028 15.7 Republic of Korea 7,284 9.4 6,157 10.3 11,181 12.5 16,693 11.5 9,926 11.1 Machinery, equipment and parts Total China 69,638 100.0 60,129 100.0 68,638 100.0 89,381 100.0 56,933 100.0 19,964 28.7 19,126 31.8 23,944 34.9 30,546 34.2 18,493 32.5 European Union 13,307 19.1 9,435 15.7 9,102 13.3 10,949 12.2 8,051 14.1 Japan 7,816 11.2 7,031 11.7 7,972 11.6 10,248 11.5 6,500 11.4 Manufactures of metal Total China 47,132 100.0 47,024 100.0 54,216 100.0 63,853 100.0 42,066 100.0 11,763 25.0 9,881 21.0 14,271 26.3 16,151 25.3 10,095 24.0 United States 3,861 8.2 4,491 9.5 6,177 11.4 7,678 12.0 5,680 13.5 Japan 4,866 10.3 5,197 11.1 7,260 13.4 7,604 11.9 3,715 8.8 1 January to August 2023 Source: Department of Statistics, Malaysia and Malaysia External Trade Development Corporation 153 2.
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BALANCE OF PAYMENTS Malaysia RM million Components 2019 Debits (-) Credits (+) Net Credits (+) 2020 Debits (-) Net 2021 Debits (-) 2022 Debits (-) Credits (+) Net Credits (+) Net Credits (+) Net 20231 Debits (-) Balance on goods and services 987,481 873,618 113,863 873,477 783,152 90,325 1,093,895 981,922 111,973 1,378,452 1,248,820 129,632 605,120 559,879 45,241 Goods Services Transport Travel 817,260 692,522 124,738 780,511 643,024 137,486 1,005,841 828,206 177,634 1,238,180 1,052,151 186,029 516,343 446,984 69,359 170,221 181,096 -10,875 92,967 140,128 -47,161 88,054 153,716 -65,661 140,272 196,670 -56,397 88,777 112,895 -24,118 21,707 47,632 -25,925 13,786 41,213 -27,427 16,474 48,337 -31,863 25,604 59,649 -34,045 14,658 29,456 -14,798 82,143 51,309 30,833 12,503 20,071 -7,569 323 15,180 -14,857 28,370 29,526 -1,156 28,594 23,505 5,090 Other services 66,371 82,155 -15,783 66,678 78,844 -12,165 71,258 90,199 -18,941 86,299 107,495 -21,196 45,525 59,934 -14,409 Primary income 65,344 104,840 -39,496 53,124 81,645 -28,520 97,698 139,851 -42,153 88,704 148,118 -59,414 41,545 64,744 -23,199 Compensation of employees 6,614 15,843 -9,229 5,991 14,052 -8,061 6,433 13,092 -6,659 7,124 14,359 -7,235 3,948 8,095 -4,147 Investment income 58,730 88,997 -30,267 47,133 67,592 -20,459 91,265 126,759 -35,494 81,580 133,759 -52,179 37,597 56,650 -19,053 Secondary income 16,905 38,355 -21,450 27,185 29,899 -2,714 20,504 30,146 -9,642 22,765 37,885 -15,120 16,855 25,504 -8,650 Balance on current account 1,069,731 1,016,813 52,918 953,787 894,696 59,091 1,212,097 1,151,919 60,178 1,489,921 1,434,823 55,098 663,520 650,127 13,392 3.6 371 -38,024 6,555 -31,154 37,709 -32,403 -478 -11,697 -37,653 -6,849 8,416 4.3 -419 -77,396 3,111 -13,808 16,919 -49,584 407 -31,330 -77,816 -572 -19,297 % of Gross National Income Capital account Financial account Direct investment Assets Liabilities Portfolio investment Financial derivatives Other investment Balance on capital and financial accounts Net errors and omissions Overall balance 1 January
 to June 2023 Note: Total may not add up due to rounding Source: Department of Statistics, Malaysia 154 2.
Statistical Table Combine BI 2024.indd 154 05/10/2023 8:38 PM 4.0 -469 16,242 31,065 -53,200 84,265 18,802 -2,250 -31,375 15,774 -30,266 45,686 3.2 -454 12,356 15,920 -48,933 64,853 -50,560 -2,212 49,208 11,902 -13,641 53,359 1.6 -103 -13,930 6,016 -12,342 18,359 -25,166 -585 5,804 -14,033 -17,471 -18,112 economic outlook 2024statistical tables statistical tables Components Credits (+) Net Credits (+) Net 2019 Debits (-) 2020 Debits (-) 2021 Debits (-) Credits (+) Net Credits (+) 2022 Debits (-) Net Credits (+) 20231 Debits (-) Net Balance on goods and services 987,481 873,618 113,863 873,477 783,152 90,325 1,093,895 981,922 111,973 1,378,452 1,248,820 129,632 605,120 559,879 45,241 Goods Services Transport Travel 817,260 692,522 124,738 780,511 643,024 137,486 1,005,841 828,206 177,634 1,238,180 1,052,151 186,029 516,343 446,984 69,359 170,221 181,096 -10,875 92,967 140,128 -47,161 88,054 153,716 -65,661 140,272 196,670 -56,397 88,777 112,895 -24,118 21,707 47,632 -25,925 13,786 41,213 -27,427 16,474 48,337 -31,863 25,604 59,649 -34,045 14,658 29,456 -14,798 82,143 51,309 30,833 12,503 20,071 -7,569 323 15,180 -14,857 28,370 29,526 -1,156 28,594 23,505 5,090 Other services 66,371 82,155 -15,783 66,678 78,844 -12,165 71,258 90,199 -18,941 86,299 107,495 -21,196 45,525 59,934 -14,409 Primary income 65,344 104,840 -39,496 53,124 81,645 -28,520 97,698 139,851 -42,153 88,704 148,118 -59,414 41,545 64,744 -23,199 Compensation of employees 6,614 15,843 -9,229 5,991 14,052 -8,061 6,433 13,092 -6,659 7,124 14,359 -7,235 3,948 8,095 -4,147 Investment income 58,730 88,997 -30,267 47,133 67,592 -20,459 91,265 126,759 -35,494 81,580 133,759 -52,179 37,597 56,650 -19,053 Secondary income 16,905 38,355 -21,450 27,185 29,899 -2,714 20,504 30,146 -9,642 22,765 37,885 -15,120 16,855 25,504 -8,650 Balance on current account 1,069,731 1,016,813 52,918 953,787 894,696 59,091 1,212,097 1,151,919 60,178 1,489,921 1,434,823 55,098 663,520 650,127 13,392 % of Gross National Income Capital account Financial account Direct investment
 Assets Liabilities Portfolio investment Financial derivatives Other investment Balance on capital and financial accounts Net errors and omissions Overall balance 1 January to June 2023 Note: Total may not add up due to rounding Source: Department of Statistics, Malaysia 3.6 371 -38,024 6,555 -31,154 37,709 -32,403 -478 -11,697 -37,653 -6,849 8,416 4.3 -419 -77,396 3,111 -13,808 16,919 -49,584 407 -31,330 -77,816 -572 -19,297 4.0 -469 16,242 31,065 -53,200 84,265 18,802 -2,250 -31,375 15,774 -30,266 45,686 3.2 -454 12,356 15,920 -48,933 64,853 -50,560 -2,212 49,208 11,902 -13,641 53,359 1.6 -103 -13,930 6,016 -12,342 18,359 -25,166 -585 5,804 -14,033 -17,471 -18,112 155 2.
Statistical Table Combine BI 2024.indd 155 05/10/2023 8:38 PM economic outlook 2024 3.14.
CONSUMER PRICE INDEX BY REGION 2010 = 100, Malaysia Groups Weights1 (%) 2019 2020 2021 2022 20232 Annual Change (%) Malaysia Total Food and non-alcoholic beverages Alcoholic beverages and tobacco Clothing and footwear 100.0 29.5 2.4 3.2 Housing, water, electricity, gas and other fuels 23.8 Furnishings, household equipment and routine household maintenance Health Transport Communication Recreation services and culture Education Restaurants and hotels Miscellaneous goods and services Peninsular Malaysia Total Food and non-alcoholic beverages Alcoholic beverages and tobacco Clothing and footwear 4.1 1.9 14.6 4.8 4.8 1.3 2.9 6.7 100.0 29.0 2.4 3.3 Housing, water, electricity, gas and other fuels 23.6 Furnishings, household equipment and routine household maintenance Health Transport Communication Recreation services and culture Education Restaurants and hotels Miscellaneous goods and services 1 Weights based on Household Expenditure Survey 2016 2 January to August 2023 Source: Department of Statistics, Malaysia 4.2 1.9 14.7 4.9 4.9 1.4 3.0 6.7 156 0.7 1.7 1.5 -2.0 1.9 1.4 0.7 -3.1 0.4 0.7 1.4 1.2 0.4 0.7 1.8 1.6 -2.0 2.0 1.6 0.7 -3.1 0.4 0.7 1.5 1.2 0.4 -1.2 1.3 0.3 -0.8 -1.7 0.3 1.1 -10.0 1.1 0.4 1.0 0.5 2.7 -1.1 1.4 0.4 -0.7 -1.7 0.3 1.1 -9.6 1.2 0.6 0.9 0.5 2.7 2.5 1.7 0.5 -0.4 1.5 1.6 0.4 11.0 0.0 0.4 0.2 0.4 0.5 2.6 1.9 0.5 - -2.6 1.7 1.8 6.2 2.4 2.8 5.7 0.7 0.3 1.6 2.7 2.0 1.8 -2.8 1.8 1.7 6.2 2.6 2.
Statistical Table Combine BI 2024.indd 156 05/10/2023 8:39 PM economic outlook 2024statistical tables statistical tables 3.14.
CONSUMER PRICE INDEX BY REGION (cont’d) 2010 = 100, Malaysia Groups Weights1 (%) 2019 2020 2021 2022 20232 Annual Change (%) Sarawak Total Food and non-alcoholic beverages Alcoholic beverages and tobacco Clothing and footwear Housing, water, electricity, gas and other fuels Furnishings, household equipment and routine household maintenance Health Transport Communication Recreation services and culture Education Restaurants and hotels Miscellaneous goods and services Sabah Total Food and non-alcoholic beverages Alcoholic beverages and tobacco Clothing and footwear Housing, water, electricity, gas and other fuels Furnishings, household equipment and routine household maintenance Health Transport Communication Recreation services and culture Education Restaurants and hotels Miscellaneous goods and services 1 Weights based on Household Expenditure Survey 2016 2 January to August 2023 Source: Department of Statistics, Malaysia 100.0 33.5 2.7 2.8 21.9 3.8 1.5 14.0 4.6 4.8 0.9 2.4 7.1 100.0 31.5 2.1 3.0 28.0 3.4 1.1 13.9 4.5 3.7 0.8 1.8 6.2 0.1 1.0 0.6 -2.5 0.9 0.7 1.3 -4.1 0.4 0.3 0.5 2.1 -0.4 0.2 0.5 1.2 -2.0 1.3 0.1 0.7 -3.2 0.2 0.5 1.0 1.2 0.0 -1.8 0.6 0.2 -0.9 -1.8 -0.2 1.4 -13.6 0.6 -0.5 2.8 0.5 2.5 -1.9 0.2 0.1 -0.9 -2.1 -0.4 1.1 -10.7 0.4 -0.1 0.3 0.7 1.5 2.1 1.1 0.3 -0.4 -0.5 0.9 0.2 15.7 0.0 -1.5 -0.7 0.6 0.5 1.6 0.6 0.2 -0.4 -1.1 1.0 0.3 12.6 0.0 2.4 -0.4 0.4 0.7 3.2 5.5 0.2 0.0 0.9 2.3 -0.8 3.9 0.0 4.9 1.5 5.2 1.2 3.0 5.1 0.2 0.1 1.9 2.3 1.5 3.5 3.6 7.1 0.9 0.4 1.7 2.8 1.6 1.1 -1.4 0.7 2.6 6.2 2.6 2.7 5.1 0.2 0.1 2.6 2.0 1.4 0.3 -0.1 -1.0 0.2 1.4 7.3 1.6 1.3 2.4 6.8 2.1 157 2.
Statistical Table Combine BI 2024.indd 157 05/10/2023 8:39 PM economic outlook 2024 3.15.
CONSUMER PRICE INDEX BY STRATUM 2010 = 100, Malaysia Groups Rural Total Weights1 (%) 100.0 Food and non-alcoholic beverages 35.6 Alcoholic beverages and tobacco Clothing and footwear Housing, water, electricity, gas and other fuels Furnishings, household equipment and routine household maintenance Health Transport Communication Recreation services and culture Education Restaurants and hotels Miscellaneous goods and services 2019 2020 2021 2022 20232 Annual Change (%) 0.3 0.9 1.6 -1.5 0.9 0.1 -0.5 -0.5 1.8 0.7 0.6 -2.5 0.1 1.7 2.6 1.6 0.2 0.0 1.3 0.6 0.5 3.0 3.6 19.9 3.7 2.0 14.6 -3.6 - -1.2 1.1 1.6 3.1 1.9 158 2.
Statistical Table Combine BI 2024.indd 158 05/10/2023 8:39 PM economic outlook 2024statistical tables statistical tables 2019 2020 2021 2022 20232 Annual Change (%) 3.15.
CONSUMER PRICE INDEX BY STRATUM (cont’d) 2010 = 100, Malaysia Groups Urban Total Weights1 (%) 100.0 Food and non-alcoholic beverages 28.4 0.7 1.8 1.5 -1.1 1.4 0.4 2.4 1.8 0.6 -2.2 -0.9 -0.5 1.8 1.6 0.7 -1.6 0.3 1.1 1.6 1.8 0.4 2.3 3.2 24.5 4.2 1.8 14.6 -3.1 -9.8 10.9 4.9 5.0 1.4 3.0 6.7 0.4 0.6 1.5 1.3 0.4 1.1 0.4 1.1 0.4 2.7 0.0 0.5 0.2 0.4 0.4 Alcoholic beverages and tobacco Clothing and footwear Housing, water, electricity, gas and other fuels Furnishings, household equipment and routine household maintenance Health Transport Communication Recreation services and culture Education Restaurants and hotels Miscellaneous goods and services 1 Weights based on Household Expenditure Survey 2016 2 January to August 2023 Source: Department of Statistics, Malaysia 3.6 6.1 0.7 0.1 1.8 3.7 0.8 5.0 0.0 2.3 1.1 5.3 2.1 3.0 6.1 0.8 0.3 1.7 2.8 2.1 1.7 -2.8 1.8 1.8 6.6 2.6 159 2.
Statistical Table Combine BI 2024.indd 159 05/10/2023 8:39 PM economic outlook 2024 3.16.
CONSUMER PRICE INDEX BY STATE 2010 = 100, Malaysia States Annual Change (%) 2019 2020 2021 2022 20231 0.7 0.6 1.4 0.4 0.1 0.7 0.3 1.1 0.6 0.3 0.9 0.1 0.2 0.1 1.2 0.3 1.1 -1.2 -1.4 -1.8 -1.5 -1.9 -1.6 -1.2 -0.8 -1.3 -2.1 -0.6 -1.3 -1.9 -1.8 -0.6 -1.9 - Total Malaysia Johor Kedah Kelantan Melaka Negeri Sembilan Pahang Pulau Pinang Perak Perlis Selangor Terengganu Sabah Sarawak Federal Territory of Kuala Lumpur Federal Territory of Labuan Federal Territory of Putrajaya 160 2.
Statistical Table Combine BI 2024.indd 160 05/10/2023 8:39 PM economic outlook 2024statistical tables statistical tables 3.16.
CONSUMER PRICE INDEX BY STATE (cont’d) 2010 = 100, Malaysia States Annual Change (%) 2019 2020 2021 2022 20231 Food and Non-Alcoholic Beverages Malaysia Johor Kedah Kelantan Melaka Negeri Sembilan Pahang Pulau Pinang Perak Perlis Selangor Terengganu Sabah Sarawak Federal Territory of Kuala Lumpur Federal Territory of Labuan Federal Territory of Putrajaya 1 January to August 2023 Source: Department of Statistics, Malaysia 2.
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CORE INDEX 2010 = 100, Malaysia Groups Weights1 (%) 2019 2020 2021 2022 20232 Annual Change (%) Total Food and non-alcoholic beverages Alcoholic beverages and tobacco Clothing and footwear Housing, water, electricity, gas and other fuels Furnishings, household equipment and routine household maintenance Health Transport Communication Recreation services and culture Education Restaurants and hotels Miscellaneous goods and services 100.0 26.5 – 4.5 26.5 5.5 2.6 6.5 6.5 6.6 1.8 3.9 9.1 1 Weights based on Household Expenditure Survey 2016 2 January to August 2023 Source: Department of Statistics, Malaysia 1.1 2.1 – -2.0 2.1 1.4 0.7 -3.1 0.4 0.7 1.4 1.2 0.4 1.1 1.2 – -0.8 1.3 0.3 1.1 0.1 1.1 0.4 1.0 0.5 2.7 0.7 1.3 – -0.4 0.6 1.6 0.4 0.7 0.0 0.4 0.2 0.4 0.5 3.0 5.8 – 0.1 1.4 3.5 0.7 5.6 0.0 2.3 1.1 5.0 2.0 3.4 6.7 – 0.3 1.9 2.7 2.0 5.2 -2.6 1.7 1.8 6.2 2.4 162 2.
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PRODUCER PRICE INDEX - LOCAL PRODUCTION 2010 = 100, Malaysia Sectors and Stage of Processing Weights1 (%) 2019 2020 2021 2022 20232 Annual Change (%) Sector (MSIC 2008) Total Agriculture, forestry and fishing Mining Manufacturing Electricity and gas supply Water supply Producer Price Index by Stage of Processing Total Crude materials for further processing Intermediate materials, supplies and components 100.0 6.7 7.9 81.6 3.4 0.3 100.0 16.4 56.1 -1.4 -4.0 -3.7 -0.9 1.5 -2.2 -1.4 -3.9 -1.4 -2.7 15.7 -36.3 -0.4 -0.4 -0.2 -2.7 -12.3 -0.5 9.5 30.2 41.2 5.5 -0.4 0.5 9.5 30.3 7.7 7.8 1.3 -2.4 -19.4 12.6 -8.4 8.4 0.7 2.6 7.8 6.2 0.2 0.8 3.2 -2.4 -14.8 10.9 -0.2 Finished goods 27.5 0.6 -0.1 -0.2 1.8 3.6 1 Weights based on Economic Census 2016 2 January to August 2023 Source: Department of Statistics, Malaysia 2.
Statistical Table Combine BI 2024.indd 163 05/10/2023 8:39 PM 163 economic outlook 2024 3.19.
LABOUR FORCE Malaysia 2019 2020 2021 2022 20234 Labour force (‘000) 15,581.6 15,667.7 15,797.2 16,022.1 16,312.3 Employment (‘000) 15,073.4 14,956.7 15,064.2 15,391.7 15,743.0 Unemployment (‘000) 508.2 711.0 733.0 630.4 569.4 Unemployment rate (%) 3.3 4.5 4.6 3.9 3.5 Labour force participation rate1 (%) Total Male Female Number of collective agreements signed in the current year2 Labour productivity3 Agriculture Mining and quarrying Manufacturing Construction Services 68.7 80.8 55.6 298 2.2 0.3 -0.3 1.7 3.6 2.9 68.4 80.6 55.3 187 -5.3 -2.0 -7.6 -2.7 -15.6 -5.7 68.6 80.9 55.5 154 2.0 -0.5 -0.8 6.7 -4.1 0.7 69.3 81.9 55.8 334 5.4 0.8 1.4 4.1 5.2 6.5 69.9 82.5 55.9 179 1.2 -0.7 -0.5 -1.0 5.9 2.1 Foreign workers (‘000) 1,999.6 1,483.4 1,171.9 1,459.2 1,781.05 1 The ratio of the labour force to the working age population (15-64 years), expressed as percentage 2 Based on the information in the Collective Agreement and the feedback from the employer for which has been given cognisance by the Industrial Court for the year 3 Annual change (%) 4 For the first half of 2023 5 As at end-August 2023 Source: Department of Statistics, Ministry of Home Affairs and Ministry of Human Resources, Malaysia 164 2.
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EMPLOYMENT BY INDUSTRY ‘000 persons, Malaysia Industry1 2019 2020 2021 2022 20234 share (%) share (%) Total employment2 15,073.4 14,956.7 15,064.2 15,391.7 100.0 15,743.0 100.0 Agriculture, forestry and fishing 1,541.1 1,566.0 1,550.0 1,540.8 10.0 1,555.8 Mining and quarrying 91.0 82.2 81.9 84.3 0.5 84.9 9.9 0.5 Manufacturing Construction Services Electricity, gas, steam and air conditioning supply Water supply; sewerage, waste management and remediation activities Wholesale and retail trade; repair of motor vehicles and motorcycles Transportation and storage 677.8 689.2 704.5 711.4 4.6 731.9 4.6 Accommodation and food and beverage service activities 1,549.7 1,540.0 1,535.5 1,547.7 10.1 1,598.3 10.2 Information and communication 223.9 223.4 235.1 236.4 Financial and insurance/takaful activities 355.1 372.1 386.5 397.2 Real estate activities 90.3 82.1 83.4 83.7 Professional, scientific and technical activities Administrative and support service activities Public administration and defence; compulsory social security 394.7 379.3 358.9 365.7 809.2 801.9 846.0 862.4 5.6 877.2 5.6 737.1 734.9 725.1 747.7 Education 992.1 937.6 924.3 943.7 Human health and social work activities 527.7 559.6 582.2 599.0 Arts, entertainment and recreation 84.0 58.2 60.5 63.5 Others service activities 266.1 267.0 274.7 279.0 Activities of households as employers3 Industry is classified according to the ‘Malaysia Standard Industrial Classification (MSIC) 2008 Ver.
1.0’ 2 Total includes ‘Activities of extraterritorial organisations and bodies 3 Labour Force Survey does not classify the subsistence goods-and services-producing activities of households as persons who are economically active.
Therefore, the classification of industry by MSIC 2008 for ‘Activities of households as employers; undifferentiated goods-and services-producing activities of household for own use’ only accounted for ‘Activities of household as employers’ 4 For the first half of 2023 Source: Department of Statistics, Malaysia 165 2.

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ACTIVE REGISTRANTS Malaysia 2019 2020 2021 2022 20232 share (%) share (%) Total Active Registrants (end-period) 299,648 500,391 887,977 546,325 100.0 253,849 100.0 Age 19 and below 36,966 327 1,805 17,016 3.1 18,606 20 – 24 25 – 29 199,476 71,087 219,340 170,139 31.1 94,581 49,080 173,200 295,432 161,879 29.6 59,933 30 and above 14,126 255,716 371,306 197,212 36.1 80,326 Gender Male Female Educational Level 109,227 240,250 422,685 264,974 48.5 125,185 190,421 260,141 465,292 281,351 51.5 128,664 Less than PT3/PMR/SRP/LCE 924 7,167 11,846 4,882 PT3/PMR/SRP/LCE 2,516 13,044 20,826 9,538 0.9 1.7 1,790 3,806 7.3 37.3 23.6 31.6 49.3 50.7 0.7 1.5 SPM/MCE Skills Certificate1 MHSC/STPM, Matriculation, Diploma and Degree Employment Status 14,754 122,489 283,259 108,173 19.8 49,592 19.5 8,663 – – – – – – 272,791 214,017 325,930 210,964 38.6 86,383 34.0 Unemployed 137,712 179,367 351,459 188,099 114,451 1 Malaysian Skills Certificate (SKM), other skills certificate and non-technical skills certificate 2 January to June 2023 Note: Covers job seekers registered with Labour Department through JobsMalaysia and within valid registration period for data prior 2020.
Beginning 2020, data are provided by Social Security Organisation obtained via MyFutureJobs portal.

The figures for certain variables for Active Registrants may not add up to total actual active registrants.

Active registrants are defined as jobseekers who have registered and active profile throughout the year.
As of now, some variables are not mandatory to be filled-up by Job Seekers hence may not add up to the overall total Source: Ministry of Human Resources and Social Security Organisation, Malaysia 166 2.

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VACANCIES AND PLACEMENTS Malaysia statistical tables 2019 2020 2021 2022 20233 share (%) share (%) Number of Vacancies by Occupational Category1 974,612 745,304 2,480,577 4,753,418 100.0 1,187,271 100.0 Managers Professionals 8,563 36,052 98,813 228,840 4.8 72,337 6.1 31,900 109,260 462,024 373,444 7.9 179,665 15.1 Technician and associate professionals 34,429 87,311 301,750 326,714 6.9 180,779 15.2 Clerical support workers 11,554 55,372 182,056 211,790 4.5 79,100 6.7 Service and sales workers 42,462 134,488 398,567 510,071 10.7 145,588 12.3 Skilled agricultural, forestry and fishery workers 2,089 4,839 8,347 49,120 1.4 16,249 Craft and related trade workers 31,982 49,815 176,813 315,621 6.8 60,505 Plant and machine operators and assemblers 147,321 80,695 221,789 367,929 7.2 54,398 1.4 5.1 4.6 Elementary occupation 664,312 187,472 630,418 2,369,889 49.9 398,407 33.6 Number of Vacancies by Sector 974,612 745,304 2,480,577 4,753,418 100.0 1,187,271 100.0 Agriculture, forestry and fishing 204,324 18,547 75,676 244,694 Mining and quarrying 3,435 1,325 9,226 12,176 5.1 0.3 68,051 16,123 5.7 1.4 Manufacturing 351,942 190,278 603,216 1,600,230 33.7 201,648 17.0 Construction Services 141,783 55,590 164,651 761,870 16.0 147,764 12.4 273,128 479,564 1,627,808 2,134,448 44.9 753,685 63.5 Number of Placements by Sector2 Agriculture, forestry and fishing Mining and quarrying Manufacturing Construction Services – – – – – – Classification of occupational groups is based on the Malaysia Standard Classification of Occupations (MASCO) 2013 2 Data for 2018 covers period from January to Jun 2018.
Data was not available for 2019 3 January to June 2023 Note: Definition of vacancies refers to job vacancy listings by employers in public (selected only) and private sector on JobsMalaysia.

The job listing includes non- substantive vacancies such as sales person, promoter, insurance agent and part-time workers as well as foreign workers.

Prior 2020, data was obtained from Labour Department through JobsMalaysia portal.
Beginning 2020, data are provided by Social Security Organisation obtained via MyFutureJobs portal.

The figures for certain variables for number of placements by sectors may not add up to total actual placements.

As of now, some variables are not mandatory to be filled-up by employers, hence may not add up to the overall total Source: Ministry of Human Resources and Social Security Organisation, Malaysia 167 2.

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INTEREST RATES Malaysia Average rates during the period (%) Average rates during the period in 2023 (%) 2019 2020 2021 2022 Jan. Feb. Mar.

Apr.

May Jun.

Jul.
Overnight interbank 3.05 2.10 1.74 2.74 2.74 2.74 2.74 2.74 2.97 2.99 3.01 1-week interbank 3.12 2.14 1.77 2.77 2.78 2.78 2.77 2.78 3.00 3.02 3.04 3-month interbank 3.46 2.39 1.92 3.63 3.67 3.61 3.61 3.54 3.46 3.41 3.50 Commercial banks Fixed deposits 3-month 2.98 1.95 1.56 2.55 2.50 2.52 2.54 2.50 2.71 2.73 2.71 12-month 3.17 2.13 1.72 2.65 2.70 2.70 2.70 2.69 2.90 2.89 2.89 Savings deposit 1.01 0.61 0.54 0.85 0.85 0.85 0.86 0.87 0.93 0.94 0.96 Weighted Base Rate1 (BR) 3.76 2.76 2.43 3.42 3.42 3.42 3.42 3.42 3.67 3.67 3.67 Base lending rate (BLR) 6.78 5.83 5.49 6.42 6.42 6.42 6.42 6.42 6.68 6.68 6.68 1 Effective from 1 August 2022, the Standardised Base Rate (SBR) replaced the BR as the main reference rate for new retail floating rate loans and financing facilities Source: Bank Negara Malaysia 168 2.
Statistical Table Combine BI 2024.indd 168 05/10/2023 8:39 PM economic outlook 2024statistical tables statistical tables 4.2.
KEY EXCHANGE RATES Malaysia RM to one unit of foreign currency1 Change (%) 2019 2020 2021 2022 2023 2019 2020 2021 2022 20232 End-December End-August End-December End- August Special Drawing Rights (SDR) 5.6592 5.7798 5.8447 5.8730 6.1499 1.7 -2.1 -1.1 -0.5 -4.5 US dollar 4.0925 4.0130 4.1760 4.4130 4.6385 1.1 2.0 -3.9 -5.4 -4.9 Singapore dollar 3.0387 3.0354 3.0896 3.2819 3.4301 -0.2 0.1 -1.8 -5.9 -4.3 100 Japanese yen 3.7655 3.8891 3.6286 3.3264 3.1731 -0.5 -3.2 7.2 9.1 4.8 Pound sterling 5.3722 5.4653 5.6361 5.3159 5.8580 -2.2 -1.7 -3.0 6.0 -9.3 Euro 4.5852 4.9324 4.7256 4.7038 5.0410 3.2 -7.0 4.4 0.5 -6.7 100 Thai baht 13.6827 13.3990 12.5011 12.7811 13.2203 -7.2 2.1 7.2 -2.2 -3.3 100 Indonesian rupiah 0.0295 0.0286 0.0293 0.0283 0.0304 -3.1 3.1 -2.2 3.4 -6.9 100 Korean won 0.3540 0.3698 0.3507 0.3494 0.3509 5.1 -4.3 5.4 0.4 -0.4 100 Philippine peso 8.0720 8.3569 8.1902 7.9214 8.1748 -2.5 -3.4 2.0 3.4 -3.1 Chinese renminbi 0.5866 0.6143 0.6552 0.6342 0.6362 2.6 -4.5 -6.2 3.3 -0.3 1 US dollar (USD) rates are the average of buying and selling rates at noon in the Kuala Lumpur Interbank Foreign Exchange Market.
Rates for foreign currencies other than USD are cross rates derived from rates of these currencies against the USD and the RM/USD rate 2 End-December 2022 – End-August 2023 Source: Bank Negara Malaysia 2.

Statistical Table Combine BI 2024.indd 169 05/10/2023 8:39 PM 169 economic outlook 2024 4.3.
COMMERCIAL BANKS: LOANS OUTSTANDING BY PURPOSE AND SECTOR Malaysia 2021 2022 December December 2023 July4 RM million share (%) RM million share (%) RM million share (%) Purpose Purchase of securities 30,249 2.5 29,603 2.4 27,815 Purchase of fixed assets other than land and building 94,923 8.0 96,388 7.9 98,360 2.3 8.0 of which: Purchase of transport vehicles 85,582 7.2 87,574 7.2 89,737 7.3 Purchase of residential property 455,320 38.2 470,286 38.7 478,458 39.1 Purchase of non-residential property 170,492 14.3 172,610 14.2 174,673 14.3 Personal uses Credit card Construction Working capital Other purpose Total Loans1 Sector2 Agriculture, forestry and fishing of which: Crops and animal production, hunting and related service activities Mining and quarrying of which: Mining of metal ores Manufacturing of which: Food products Basic metals 2.
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COMMERCIAL BANKS: LOANS OUTSTANDING BY PURPOSE AND SECTOR (cont’d) Malaysia 2021 2022 December December 2023 July4 RM million share (%) RM million share (%) RM million share (%) Electricity, gas, steam and air conditioning supply 9,855 0.8 11,626 Water supply, sewerage, waste management and remediation activities 1,953 0.2 1,978 1.0 0.2 8,982 1,949 Construction of which: 59,865 5.0 58,457 4.8 58,299 Construction of buildings 31,902 2.7 32,658 2.7 32,365 Wholesale and retail trade; repair of motor vehicles and motorcycles 94,418 7.9 99,376 8.2 98,822 Accommodation and food service activities 17,283 1.4 17,706 1.5 16,545 Transportation and storage 15,848 1.3 15,542 1.3 16,988 Information and communication 11,502 1.0 12,479 1.0 12,476 0.7 0.2 4.8 2.6 8.1 1.4 1.4 1.0 Finance, insurance, real estate and business activities 162,873 13.6 168,174 13.8 170,940 14.0 Education, health and others 27,854 2.3 26,454 2.2 27,197 2.2 Household sector 665,617 55.8 680,853 56.0 689,425 56.3 Other sector3 6,117 0.5 7,514 0.6 7,576 0.6 1 Includes loans sold to Cagamas 2 Definitions of economic sectors/industries are based on Malaysia Standard Industrial Classification 2000 3 Includes loans to individual businesses 4 Data for loans/financing from July 2022 onwards are the new set of loan/financing data, reflecting the latest requirements established in 1997, with several enhancements over the years to reflect developments in the financial sector Note: Data based on BNM Monthly Statistical Bulletin ( July 2023).
Total may not add up due to rounding Source: Bank Negara Malaysia 2.

Statistical Table Combine BI 2024.indd 171 05/10/2023 8:39 PM 171 economic outlook 2024 4.4.

GOVERNMENT AND CORPORATE BOND YIELDS Malaysia 2021 2022 Jan. Feb. Mar.

Apr.

May Jun.

Jul.
2023 Malaysian Government Securities market indicative yield (%) 1-year 3-year 5-year 10-year 5-year corporate bond yields (%) AAA AA A BBB Source: Bank Negara Malaysia 2.
Statistical Table Combine BI 2024.indd 172 05/10/2023 8:39 PM economic outlook 2024statistical tables 4.5.
BURSA MALAYSIA: SELECTED INDICATORS statistical tables Indices1 Composite FBM EMAS FBM ACE 2019 2020 2021 2022 20233 1,588.76 1,627.21 1,567.53 1,495.49 1,451.94 11,323.49 11,761.93 11,308.79 10,701.55 10,740.70 5,226.59 10,734.69 6,419.60 5,308.33 5,217.97 Trading volume2 (million units) 653,085.5 1,855,808.5 1,433,358.5 729,295.8 559,605.1 Main Market ACE Market LEAP Market 453,037.4 1,072,204.6 902,137.2 480,595.2 376,104.4 103,750.4 638,349.2 446,341.2 165,900.2 125,690.7 332.8 187.7 209.5 170.7 214.8 Daily Average 2,676.6 7,483.1 5,850.4 3,001.2 3,475.8 Trading value2 (RM million) 525,225.9 1,068,009.6 897,043.9 530,856.0 340,020.0 Main Market ACE Market LEAP Market 483,252.3 855,623.4 745,509.4 466,244.9 288,407.5 21,404.7 176,370.0 139,017.6 50,524.0 42,488.1 33.2 37.8 44.5 35.6 65.5 Daily Average 2,152.6 4,306.5 3,661.4 2,184.6 2,111.9 Market capitalisation1 (RM billion) 1,711.8 1,817.3 1,789.2 1,736.2 1,776.3 Market capitalisation/GDP (%) 120.2 135.1 129.0 114.90 – 1 End-period 2 Based on market transactions and direct business transactions 3 End-August 2023 Source: Bursa Malaysia 2.
Statistical Table Combine BI 2024.indd 173 05/10/2023 8:39 PM 173 economic outlook 2024 4.6.
ISLAMIC BANKS: LOANS OUTSTANDING BY PURPOSE AND SECTOR Malaysia 2021 2022 December December 2023 July4 RM million share (%) RM million share (%) RM million share (%) Purpose Purchase of securities 54,307 7.6 57,362 7.2 49,523 6.0 Purchase of fixed assets other than land and building of which: 98,165 13.7 110,877 13.9 119,133 14.5 Purchase of transport vehicles 93,046 13.0 104,701 13.1 112,566 13.7 Purchase of residential property 233,818 32.7 266,550 33.3 285,957 34.7 Purchase of non-residential property Personal uses Credit card Construction Working capital Other purpose Total Loans1 Sector2 Agriculture, forestry and fishing of which: Crops and animal production, hunting and related service activities Mining and quarrying of which: Mining of metal ores Manufacturing of which: Food products Basic metals 174 2.
Statistical Table Combine BI 2024.indd 174 05/10/2023 8:39 PM economic outlook 2024statistical tables statistical tables 4.6.
ISLAMIC BANKS: LOANS OUTSTANDING BY PURPOSE AND SECTOR (cont’d) Malaysia 2021 2022 December December 2023 July4 RM million share (%) RM million share (%) RM million share (%) Electricity, gas, steam and air conditioning supply 6,121 0.9 10,953 Water supply, sewerage, waste management and remediation activities 1,152 0.2 1,588 1.4 0.2 8,635 1,600 Construction of which: 43,388 6.1 44,754 5.6 42,387 Construction of buildings 24,648 3.4 24,601 3.1 24,129 Wholesale and retail trade; repair of motor vehicles and motorcycles 35,310 4.9 42,799 5.3 46,341 Accommodation and food service activities 2,371 0.3 2,443 0.3 2,781 Transportation and storage 12,247 1.7 13,719 1.7 13,946 Information and communication 7,180 1.0 10,328 1.3 9,807 Finance, insurance, real estate and business activities 70,005 9.8 77,014 9.6 78,346 Education, health and others 16,361 2.3 19,058 2.4 20,634 1.0 0.2 5.1 2.9 5.6 0.3 1.7 1.2 9.5 2.5 Household sector 459,580 64.3 510,629 63.8 531,716 64.6 Other sector3 8,743 1.2 10,269 1.3 10,449 1.3 1 Includes loans sold to Cagamas 2 Definitions of economic sectors/industries are based on Malaysia Standard Industrial Classification 2000 3 Includes loans to individual businesses 4 Data for loans/financing from July 2022 onwards are the new set of loan/financing data, reflecting the latest requirements established in 1997, with several enhancements over the years to reflect developments in the financial sector Note: Data based on BNM Monthly Statistical Bulletin ( July 2023).
Total may not add up due to rounding Source: Bank Negara Malaysia 2.

Statistical Table Combine BI 2024.indd 175 05/10/2023 8:39 PM 175 economic outlook 2024 5.1.

PROGRESS OF SUSTAINABLE DEVELOPMENT GOALS BY INDICATOR Malaysia No.

Available Indicator Unit Year Value SDG 1: No Poverty 1.

Households below the international poverty line 2.

Households below the national poverty line 3.

Multidimensional Poverty Index 4.

Number of recipients of assistance % % Index (‘000) 5.
Population using safely managed drinking water services % 6. a.

Number of deaths attributed to disasters per 100,000 population b.

Number of affected people with damaged homes attributed to disasters per 100,000 population per 100,000 population per 100,000 population SDG 2: Zero Hunger 1.

Prevalence of underweight among children under 5 years of age 2.

Prevalence of stunting among children under 5 years of age 3.

Prevalence of wasting of children under 5 years of age 4.
Prevalence of overweight among children under 5 years of age 5.

Prevalence of anaemia (women aged 15-49 years) % % % % % 6. a.

Number of semen (animal genetic resources) Number b.

Number of local live purebred cattle (animal genetic resources) Number 7.
Local breeds at risk of extinction % .... 5.6 8.4 0.011 .... 612.2 580.5 96.9 97.0 0.0 0.1 150.0 761.0 14.1 .... 21.8 .... 9.7 .... 5.6 .... 29.9 .... 24,259 25,578 529 414 99.9 99.9 176 2.

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Available Indicator Unit Year Value statistical tables SDG 3: Good Health and Well-Being 1.

Maternal mortality ratio per 100,000 live births 2.

Births attended by skilled health personnel 3.

Under-five mortality rate per 1,000 live births 4.

Neonatal mortality rate per 1,000 live births Ratio % Ratio Ratio 5.

Number of new HIV infections per 1,000 uninfected population Ratio 6.

Tuberculosis incidence per 100,000 population 7.

Malaria incidence per 1,000 population 8.


Hepatitis B notification rate per 100,000 population 9.
Mass Drug Administration coverage among targeted population in filarial endemic 10. a. Probability of dying between the exact ages 30 and 70 years from cardiovascular disease b. Probability of dying between the exact ages 30 and 70 years from cancer c. Probability of dying between the exact ages 30 and 70 years from diabetes d. Probability of dying between the exact ages 30 and 70 years from chronic respiratory disease Ratio Ratio Ratio % % % % % 11.
Suicide mortality rate per 100,000 population Ratio 12. a.

Coverage of treatment interventions for Opioids b.

Coverage of treatment interventions for Amfetamine Type Stimulant (ATS) 13.
Prevalence of Heavy Episodic Drinking (HED) among 18 years old and above % % % ... 72.6 64.0 0.1 0.1 12.6 11.6 91.3 97.2 136.0 155.1 71.4 69.2 8.0 10.3 16.9 21.4 2.0 3.5 86.3 90.8 53.7 70.8 1.0 .... 177 2.

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Available Indicator Unit Year Value 14.

Death rate of road traffic injuries per 100,000 population Ratio 15.

Married women who use modern methods for family planning % 16. a. Adolescent birth rate (aged 10-14 years) per 1,000 women Ratio b. Adolescent birth rate (aged 15-19 years) per 1,000 women Ratio 17. a.

Household expenditures on health (10%) b.

Household expenditures on health (25%) 18.

19.

20.
19.

20.

Mortality rate attributed to unsafe water, unsafe sanitation and lack of hygiene per 100,000 population (reported by MOH facilities) Mortality rate due to the accidental poisoning by and exposure to noxious substance per 100,000 population (reported by MOH facilities only) Age-standardised prevalence of current tobacco use among persons aged 15 years and older 21. a.

Proportion of the target population covered by DTP (3rd dose) b.
Proportion of the target population covered by MMR (2nd dose) c. Proportion of the target population covered by HPV (last dose in the schedule) 22. a. Density and distribution of doctors per 1,000 population b. Density and distribution of dentist per 1,000 population 23.

Capacity and health emergency preparedness 24.


Bloodstream infections due to selected antimicrobial resistant organisms % % Ratio Ratio % % % Ratio Ratio % % .... 0.1 0.1 7.8 6.1 2.0 1.5 0.2 0.1 0.3 0.7 0.3 0.3 20.7 .... 97.7 94.2 97.4 99.5 82.6 13.3 2.3 2.4 0.4 0.4 86.0 85.0 3.8 3.3 178 2.
Statistical Table Combine BI 2024.indd 178 05/10/2023 8:39 PM economic outlook 2024statistical tables No.

Available Indicator Unit Year Value statistical tables SDG 4: Quality Education 1. a.

Proportion of children people in grades 2/3 achieving at least a minimum proficiency level in reading b.
Proportion of children people in grades 2/3 achieving at least a minimum proficiency level in mathematics c. Proportion of children the end of primary achieving at least a minimum proficiency level in reading d. Proportion of children at the end of primary achieving at least a minimum proficiency level in mathematics e. Proportion of young people at the end of lower secondary achieving at least a minimum proficiency level in reading f. Proportion of young people at the end of lower secondary achieving at least a minimum proficiency level in mathematics 2.
Proportion of children aged 24-59 months who are developmentally on track in health 3.

Participation rate in preschool 4.

5.

Participation rate in education and formal training in the previous 12 months Adults with information and communication technology (ICT) skills in using copying and pasting techniques to duplicate or transfer information within document 6.

Gender parity index for participation rate in preschool (female/male) 7.

Achieving proficiency in literacy skil (15 years and above) 8.
Basic services for electricity offered by schools 9.

Teachers with minimum organised teacher training for preschool SDG 5: Gender Equality 1.

Number of non-muslim women aged 20-24 years old who were married before 18 years 2. a.
Seats held by women in Senate % % % % % % % % % % % % .... 98.6 .... 95.0 .... 83.1 82.2 .... 56.4 .... 97.2 .... 87.5 86.1 10.5 10.3 87.7 93.2 1.02 1.03 95.5 94.6 99.0 100.0 100.0 36.7 2,293 2,169 13.8 18.2 179 2.

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Available Indicator Unit Year Value b.


Seats held by Parliament of Malaysia women in House of Representatives c. Seats held by women as Cabinet Ministers d. Seats held by Parliament of Malaysia women as Deputy Ministers 3.

Women in managerial positions 4.

Women aged 15-49 who use contraceptive use 5.


Mobile phone ownership by individuals SDG 6: Clean Water Sanitation 1 2 3 4 Safely managed drinking water services Safely managed sanitation services Proportion of bodies of water with good ambient water quality Proportion of transboundary basin area with an operational arrangement for water cooperation SDG 7: Affordable and Clean Energy 1.

Access to electricity 2.


Renewable energy share in the total primary energy supplied 3 Energy intensity (toe/ GDP at constant price 2015 (RM Million)) SDG 8: Decent Work and Economic Growth 1.
Annual growth rate of real GDP per capita % % % % % % % % % % % % % .... 96.4 97.4 96.9 97.0 99.7 .... 95.1 95.1 2.0 2.0 99.9 99.9 3.4 3.9 69.2 70.0 -5.3 2.7 180 2.

Statistical Table Combine BI 2024.indd 180 05/10/2023 8:39 PM economic outlook 2024statistical tables No.
Available Indicator Unit Year Value statistical tables 2.

Annual growth rate of real GDP per employed person 3.

Share of employment in the informal sector 4.

Mean monthly salaries & wages of employees 5.

Unemployment rate 6.

Proportion of youth not in education, employment or training % % RM % % 7. a.

Incidence rates of fatal occupational injuries per 100,000 workers Ratio b.

Incidence rates of non-fatal occupational injunes per 100,000 workers 8.

Growth rate of tourism to GDP Ratio % 9. a.


Number of commercial bank branches per 100,000 adults Ratio b.

Number of automated teller machines (ATMs) per 100,000 adults Ratio 10.

Adults with an account at a financial institution % SDG 9: Industry Innovation and Infrastructure 1. a.

Number of passengers by rails b.
Number of passengers at airport million million c. Freight volumes and containers handled by KTMB (‘000 tonnes) d. Cargo handled by airport e. Cargo throughput by port (‘000 tonnes) (‘000 000 tonnes) -5.3 1.8 9.3 .... 2,933 3,037 4.6 3.9 13.6 9.3 2.09 2.00 216.0 141.0 2.0 0.8 9.0 8.7 55.6 54.3 95.9 95.7 137.4 78.5 26.8 11.0 4,551.0 4,793.0 789.1 1,008.1 564.3 591.5 181 2.
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Available Indicator Unit Year Value 2.

Manufacturing value added per capita RM 3.

4.

Manufacturing employment as 2017 a proportion of total employment Share manufacturing value added of Small and Medium Enterprise (SMEs) to GDP 5.

Proportion of SMEs with a loan or line of credit 6.

Research and development expenditure as a proportion of GDP 7.

Number of researchers per million inhabitants 8.


Medium and high-tech industry value added ratio in total manufacturing value added (at constant prices) 9.

Population covered by a mobile network SDG 10: Reduced Inequalities 1.

Compounded annual growth rate among Bottom 40 (B40) 2.

Households below 50 per cent of median income 3.

Compensation of employees by kind of economic activity at current prices 4.
Remittance costs as a proportion of the amount remitted % % % % % % % % % % SDG 11: Sustainable Cities and Communities 1. a.

Number of deaths attributed to disasters per 100,000 population Ratio b.

Number of affected people with damaged homes attributed to disasters per 100,000 population 2.
Annual mean levels of fine particulate matter in cities Ratio (PM10) (µg/m3) 2020 2021 2020 2021 2020 2021 2015 2020 2018 2020 2018 2020 2020 2021 2020 2021 2019 2020 2019 2020e 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 9,488 10,352 16.7 16.6 34.5 34.2 53.8 .... 1.0 .... 2,127 .... 47.1 48.0 96.7 98.5 3.4 .... 16.9 16.2 37.1 34.8 2.5 2.2 0.0 0.1 150.0 761.0 22 23 182 2.

Statistical Table Combine BI 2024.indd 182 05/10/2023 8:39 PM economic outlook 2024statistical tables No.
Available Indicator Unit Year Value statistical tables SDG 12: Responsible Consumption and Production 1.

Number of participations in international multilateral environmental agreements 2. a.

Quantity of clinical wastes handled (tonnes ‘000) b.

Quantity of Scheduled waste managed (tonnes ‘000) SDG 13: Climate Action 1. a.

Number of deaths attributed to disasters per 100,000 population Ratio b.

Number of affected people with damaged homes attributed to disasters per 100,000 population 2.
CO2 eq emissions SDG 14: Life Below Water 1 a. Malaysia Marine Water Quality Index in coastal area with excellent status (number of station) b. Malaysia Marine Water Quality Index in estuary area with excellent status (number of station) c. Malaysia Marine Water Quality Index in island area with excellent status (number of station) 2.

Coverage of protected areas in relation to marine areas SDG 15: Life on Land 1.

Forest area as a proportion of total land area 2.


Important sites for terrestrial and freshwater biodiversity that are covered 3.

Number of wildlife crime cases for possession/ own use category Ratio (tonnes (million)) % % % .... 55 85 3 7 46 53 5.4 5.4 .... .... .... .... 1,060 600 183 2.
Statistical Table Combine BI 2024.indd 183 05/10/2023 8:39 PM economic outlook 2024 No.

Available Indicator Unit Year Value SDG 16: Peace, Justice and Strong Institutions 1.

Number of intentional homicide cases per 100,000 population Ratio 2.

Children aged 1-5 years who experienced any physical punishment and/or psychological aggression by caregivers in the past month 3.

Unsentenced detainees as of prisoner (%) 4.

Federal Government expenditures as a proportion of original approved budget 5.
Number of complaints on public services 6.

Civil servant with disabilities in public service SDG 17: Partnerships for the Goals 1.

Share government revenue as a proportion of GDP 2.

Share of Federal Government tax revenue and expenditure 3.

Fixed-broadband penetration rate per 100 inhabitants 4.

Individuals using the Internet % % % % % Ratio % 5.

Value of financial and technical assistance committed to developing countries RM ‘000 6.

Worldwide weighted World Trade tariff-average 7.


Share of global exports 8.


Statistical indicators for 2018 50.9 2019 Sustainable Development Goals monitoring Note: .... indicates data not available Source: Department of Statistics, Malaysia % % % 2019 2020 2016 2020 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2019 2020 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 .... .... 70.8 .... 40.5 39.3 92.9 96.8 3,649 4,074 0.3 0.3 15.9 15.1 55.9 58.7 8.9 .... 89.6 96.8 778.1 2,594.5 3.8 3.5 1.3 1.3 62.4 75.1 184 2.
Statistical Table Combine BI 2024.indd 184 05/10/2023 8:39 PM economic outlook 2024statistical tables MINISTER OF FINANCE YAB Dato' Seri Anwar bin Ibrahim DEPUTY MINISTER OF FINANCE YB Datuk Seri Ahmad Maslan DEPUTY MINISTER OF FINANCE YB Tuan Steven Sim Chee Keong TREASURY OF MALAYSIA Secretary General of Treasury Datuk Johan Mahmood Merican ROYAL MALAYSIAN CUSTOMS DEPARTMENT Director General of Customs Dato’ Anis Rizana binti Mohd Zainudin ACCOUNTANT GENERAL’S DEPARTMENT OF MALAYSIA Accountant General of Malaysia Pn.
Nor Yati Ahmad VALUATION AND PROPERTY SERVICES DEPARTMENT Director General of Valuation and Property Services Sr Abdul Razak bin Yusak LANGKAWI DEVELOPMENT AUTHORITY Chief Executive Officer - CENTRAL BANK OF MALAYSIA Governor Datuk Abdul Rasheed Ghaffour SECURITIES COMMISSION MALAYSIA Chairman Dato' Seri Dr. Awang Adek Hussin BANK SIMPANAN NASIONAL Chief Executive En.
Jay Khairil Jeremy Abdullah MALAYSIA DEPOSIT INSURANCE CORPORATION Chief Executive Officer En.

Rafiz Azuan bin Abdullah BURSA MALAYSIA BERHAD Chief Executive Officer Datuk Muhamad Umar Swift INLAND REVENUE BOARD OF MALAYSIA Chief Executive Officer/ Director General of Inland Revenue Dato’ Sri Dr. Mohd Nizom bin Sairi EMPLOYEES PROVIDENT FUND Chief Executive Officer Datuk Seri Amir Hamzah Azizan LABUAN FINANCIAL SERVICES AUTHORITY Director General En.
Nik Mohamed Din bin Nik Musa PUBLIC SECTOR HOME FINANCING BOARD Chief Executive Officer En.

Mohd Farid bin Dato’ Hj Nawawi MALAYSIA TOTALISATOR BOARD Chief Executive Officer Pn.
Nor Hashimah Hashim RETIREMENT FUND (INCORPORATED) Chief Executive Officer Datuk Hajah Nik Amlizan Mohamed 185 ORGANISATION OF THE MINISTRY OF FINANCE MALAYSIA NEW.indd 185 05/10/2023 8:10 PM organisation of the ministry of finance malaysiaeconomic outlook 2024 TREASURY OF MA L AYS I A MINISTE R OF FINANCE YAB Dato' Seri Anwar bin Ibrahim DEPUT Y MINISTER OF F INANCE YB Datuk Seri Ahmad Maslan DEPUTY MINISTE R OF FINANCE YB Tuan Steven Sim Chee Keong SECRETARY GENE RAL OF TREASURY Datuk Johan Mahmood Merican DEPUTY SECRETARY GENERAL OF TREASURY (POLICY) Dato’ Zamzuri bin Abdul Aziz DEPUTY SECRE TARY GENERAL OF TREAS URY (MANAGEMENT) Datin Rashidah binti Mohd Sies DEPUTY SECRETARY GENERAL OF TRE ASURY (INVEST MENT) - NATIONAL BUDGET OFFICE Dato' Shahrol Anuwar bin Sarman TAX DIVISION Dato’ Che Nazli binti Jaapar FISCAL AND EC ONOMICS DIVISION Dr Mastura binti Abdul Karim INTERNATIONAL DIVISION En.
Abu Bakar @ Salleh bin Jambol REGISTRAR OFFICE OF CREDIT REPORT ING AGENCIES En.

Salsuriya bin Selamat GOVERNMENT PROCUR EMENT DIVISION Dato' Indera Ab Rahim bin Ab Rahman GOVERNMENT INVESTMENT COMPANI ES DIVISION Dato’ Dr Amiruddin bin Muhamed STRATEGIC FINANC IAL CONTROL AND C ORPORATE En.

Mohd Sakeri bin Abdul Kadir REMUNE RATION POLICY AND MANAGEMENT DIVISION Datin Paduka Roslinah binti Md Jani INFORMAT ION TECH NOLOGY DIVISION Dato’ Shuhairi bin Abd Ghani SABAH FEDERAL TREASURY Pn.
Rafidah binti Datu Derin SARAWAK FEDERAL TREASURY En.

Leonard Wilfred Yussin STRATEGIC INVESTMENT DIVISION Pn.

Nor Eni binti Ismail STATUTORY B ODY ST RATEGIC MANAGEMENT DIVISION Datin Rosni binti Mohd Yusoff PUBLIC ASSET MANAGEMENT DIVISION Dato’ Ahmad Suhaimi bin Endut OFFICE OF THE SPECIAL COMMISSIONERS OF INCOME TAX Dato' Othman bin Yusof LEGAL DIVISION Pn.

Rafidah binti Omar CUSTOMS APPEAL T RIBUNAL Tn.

Haji Yaacub bin Haji Chik TREASURY INTE RNAL AUDIT UNIT En.
Abd Ghani bin Sulaiman NAT IONAL INTE R AGENCY UNIT FOR ECONOMIC STIMULUS IMPLEMENTATION AND COORDINATION - INTEGRITY UNIT Dato’ Zainul bin Darus CORPORATE COMM UNICAT IONS UNIT - 186 ORGANISATION OF THE MINISTRY OF FINANCE MALAYSIA NEW.indd 186 05/10/2023 8:10 PM organisation of the ministry of finance malaysiaeconomic outlook 2024 MINISTRY OF FINANCE E C O N O M I C O U T L O O K | 2 0 2 4 V O L U M E 6