6.2 percent by 2023, and increases from 17.5 percent to 18.4 percent over the same five-year period.<sup>5</sup> The calibrations are consistent with (i) the gradual downward trend in in recent years amid fiscal II<sup>PP</sup> /YY consolidation, and (ii) a rebalancing towards private investment.<sup>6</sup> II<sup>GG</sup> /YY

# **Figure 2.1. Baseline Investment-to-Output Ratios**

<!-- Start of picture text --> A. Public Investment (% of GDP) B. Private Investment (% of GDP)<br>12.0 20.0<br>11.0 19.0<br>18.0<br>10.0<br>17.0<br>9.0<br>16.0<br>8.0<br>15.0<br>7.0<br>14.0<br>6.0 13.0<br>5.0 12.0<br>WDI IMF (2019) Calibration WDI IMF (2019) Calibration<br>2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050<br><!-- End of picture text --> The baseline projections put Malaysia between the 75<sup>th</sup> and 90<sup>th</sup> percentiles of the distribution of among high-income countries and at the 50<sup>th</sup> percentile for (Table 2.2). Generally, declines II<sup>GG</sup> /YY and increases as countries move from lower to higher country income group classifications. One II<sup>PP</sup> /YY II<sup>GG</sup> /YY reason underlying the comparatively high in Malaysia is that public investment includes investment II<sup>PP</sup> /YY spending by state-owned enterprises (SOEs).<sup>7</sup> While the classification of expenditure by SOEs as public II<sup>GG</sup> /YY investment may differ country-to-country, there are some indications that public investment tends to be higher in countries that have a significant presence of SOEs.<sup>8</sup> 5 These baseline projections by the IMF assume GDP growth of 4.8 percent, debt-to-GDP remaining around 50 percent, a fiscal deficit around 3 percent, and roughly stable revenue mobilization rates over the next five years. 6 Our projections, indicative of longer-term trends, are also consistent with the near-term projections of the government for , but higher in the case of . Ministry of Finance Malaysia (2019) estimates and at 6.5 percent and 16.8 percent respectively for 2019 and forecasts these ratios at 6.1 percent and 16.3 percent respectively for 2020. 7 II Known as non-financial public corporations (NFPCs) in Malaysia, these enterprises are public sector agencies undertaking<sup>GG</sup> /YY II<sup>PP</sup> /YY II<sup>GG</sup> /YY II<sup>PP</sup> /YY the sale of industrial and commercial goods and services. They include government-owned and/or government-controlled companies. The government’s monitoring and reporting are focused on major NFPCs, which have government ownership of more than 50 percent of total equity, minimum annual sales of at least MYR100 million and/or significant impact to the economy (Ministry of Finance Malaysia 2018). 8 In a list of 21 countries with the highest shares of SOEs among their top 10 firms and which also have at least 10 firms on the Forbes Global 2000 list (Kowalski et al. 2013), Malaysia is ranked fifth. Among the top 10 countries on this list (China, United Arab Emirates, the Russian Federation, India, Malaysia, Saudi Arabia, Indonesia, Brazil, Norway and Thailand), we calculate the median value for average over 2006-2015 as 7 percent. Our calculations also indicate that the baseline projection of 6 percent for Malaysia’s is slightly below the 75<sup>th</sup> percentile value for average over 2006-2015 (6.8 percent) of high-income fuel-based economies (fuel exports/merchandise exports >15 percent). II<sup>GG</sup> /YY II<sup>GG</sup> /YY 9 II<sup>GG</sup> /YY