Malaysian Economy Set to Perform Better Under Anwar
Malaysian politics was in chaos when Datuk Seri Anwar Ibrahim became the Prime Minister in November 2022. Amid doubt and scepticism, the pragmatic politician has brought about political stability – the cornerstone of any investment decision.
There is now greater confidence among investors and the public that the Malaysian economy is heading in the right direction, after more than a year of doubt over whether the government under Datuk Seri Anwar Ibrahim could fix the country’s economic problems.
This comes after the release of some positive economic data in recent months, and re-affirmation of the country’s credit rating by international rating agencies.
The government of Prime Minister Anwar Ibrahim, who assumed the premiership in November 2022, has projected the economy to grow by 4 to 5 per cent this year.
But recent developments – particularly with the influx of foreign direct investment (FDI) into artificial intelligence (AI) and other high-tech sectors – indicate gross domestic product (GDP) growth could hit the higher end of the range – or even surpass 5 per cent growth this year.
Malaysia’s first-quarter GDP grew faster than expected. GDP grew 4.2 per cent in the period of January to March this year, compared to the same period in 2023.
That 4.2 per cent was higher than market estimates. And it also outstripped growth in the final quarter of 2023, when the economy expanded only 3 per cent year-on-year.
Bank Negara Malaysia had attributed the stronger growth in the first quarter of 2024 to higher household spending, more investments and a rise in tourist arrivals.
And second-quarter growth is showing a similar heartening trend.
On 20 July, Anwar revealed that economic growth for April to June is projected to hit 5.8 per cent, beating earlier estimates. This also stands as the highest growth figure since the second quarter of 2022, which saw 7.4 per cent growth.
With that, the Prime Minister sounded a strong message of optimism.
“Malaysia has broken through the wall of uncertainty by registering an amazing 5.8 percent growth in the second quarter, beyond normal expectations and projections presented by all parties,” he said on his official X account.
He added: “I am confident that with our cooperation and focus on economic development, we will succeed. This will enable us to rise as a strong nation.”
FDI-led recovery on the back of political stability
The recovery in the economy – which was marred by a frequent change of governments from 2018 to 2022 – can be attributed chiefly to Anwar’s business-friendly policies, as shown in investment incentives laid down under various new economic plans.
His pragmatic diplomatic stance in maintaining a neutral stand amid US-China trade war has also helped to lure China-based investments looking for a third country for expansion.
In addition, Malaysia is now experiencing a period of relative political stability, after the chaos from 2018 to late 2022.
Many opposition MPs have pledged support for Anwar’s leadership. And the country’s outspoken new King is also a strong stabilising force.
Sultan Ibrahim Iskandar has called for unity, and has warned politicians against threatening any attempts to upset political stability. He has said he will not entertain any requests that may lead to another political crisis.
“I would like to advise not to drag this country again into another political crisis at a time when the people are facing hardship and an uncertain future as a result of the Covid-19 pandemic,” he said during his speech in parliament in May this year.
On the domestic front, the Prime Minster has introduced reforms to improve governance and the livelihood of the people, giving cash aid to targeted groups, and encouraging employers to raise wages, although some crucial woes – like worries over costs of living – still remain.
On the external front, Anwar made several overseas trips soon after assuming the premiership in November 2022 to woo FDI into the country in a big push to spur economic activity and create jobs.
Anwar’s visit to Beijing and meeting with Chinese President Xi Jinping in early 2023 had won China’s commitment to invest RM170 billion in Malaysia. These investments covered a range of sectors, including infrastructure, renewable energy, telecommunications and tourism.
The potential of attracting massive investment from China sparked a glimmer of hope then. And optimism has skyrocketed since late 2023, after US tech giants started pouring into Malaysia.
The country’s emphasis on building a digital economy, and developing its renewable energy, high-tech and artificial intelligence (AI) sectors has attracted the attention of these giants.
Following the entry of AI chip giant Nvidia in late November 2023, other US tech titans that announced multi-billion investments in Malaysia included Google and Microsoft. In June, TikTok owner ByteDance was reported to be planning to invest RM10 billion in the country.
The influx of these prominent tech players will help develop Malaysia’s AI ecosystem. This will mean the need for more computing power, construction of data centres and related infrastructure.
Malaysia is also benefiting from the increased demand for data centres as a result of Singapore’s three-year moratorium on building new data centres due to the limited availability of land, according to Moody’s Ratings.
Prudent economic management
Anwar’s management of the economy is also winning applause. His move to reform and cut the huge diesel subsidies augurs well for Malaysia’s public finance and fiscal health.
And concerns over the high government debt level is being addressed. The Finance Ministry has said Malaysia will continue to reduce its annual fiscal deficit by reducing subsidies and unwarranted expenditure. It will also ensure the debt-to-GDP target will be kept below 60 per cent.
Fiscal deficit is projected to be reduced to 4.3 per cent in 2024, from 5.0 per cent in 2023. In the medium term, the Government aims to achieve a budget deficit of 3 per cent or less, according to the Finance Ministry.
As a result of these policies and initiatives, Malaysia’s sovereign credit ratings were reaffirmed in June 2024 by S&P Global Ratings at A- and Fitch Ratings at BBB+, with both maintaining their “Stable” outlook.
“The reaffirmation of Malaysia’s sovereign credit ratings and positive economic outlook by S&P and Fitch is testament to the Government’s responsible economic management and how the Ekonomi MADANI reform agenda is delivering positive results,” said Anwar, who is also Finance Minister, on the ministry’s website.
Conviction that Malaysia is turning the corner is reflected in the stock market. International funds, which were net sellers on Bursa Malaysia previously, turned into net buyers of the equities this year.
The property sector is also experiencing a recovery. Hong Leong Investment Bank observed in its research note in July: “A multi-year property upcycle has been set in motion, driven by the rise in industrial developments, providing developers with a new growth avenue.”
A noteworthy feature in the current upcycle is that industrialisation and investments have spread to Johor, Penang, Sarawak, and Kedah.
Sarawak is attracting renewable energy players, while Johor is seeing a renewed interest due to the construction of infrastructure projects brought about by investment in AI data centres.
On the tourism front, Malaysia will pocket more tourist dollars, particularly from India and China. By giving a visa-free stay of up to 30 days for nationals from these countries, travellers from China and India are flooding Malaysia. And Malaysia’s stronger ties with China, brought about by Anwar’s efforts, has had the effect of luring more Chinese tourists. The number of Chinese tourists visiting Malaysia more than tripled to 1.12 million from December 2023 to April 2024, compared to 332,144 tourists during the same period the previous year, according to official figures.
While Malaysia’s economy is generally expected to perform well this year and next, it still faces challenges that can only be overcome with political will.
Anwar needs to stem corruption, raise competitiveness, adopt an open attitude towards freedom of expression and promote greater unity among its multi-racial population.
Hot off the press
Women are finding – and creating – more space and opportunities to make themselves seen, heard and valued in workplace and in society. They’re breaking barriers, shattering glass ceilings, and paving the way for a more equitable society.
In our Aug/Sept 2024 issue, we shine the spotlight on women. We look at how far women’s rights and opportunities have come in Malaysia, and speak to outstanding and accomplished women who have made waves with their grit, hard work and heart.
Malaysian Economy Set to Perform Better Under Anwar
Malaysian politics was in chaos when Datuk Seri Anwar Ibrahim became the Prime Minister in November 2022. Amid doubt and scepticism, the pragmatic politician has brought about political stability – the cornerstone of any investment decision.
There is now greater confidence among investors and the public that the Malaysian economy is heading in the right direction, after more than a year of doubt over whether the government under Datuk Seri Anwar Ibrahim could fix the country’s economic problems.
This comes after the release of some positive economic data in recent months, and re-affirmation of the country’s credit rating by international rating agencies.
The government of Prime Minister Anwar Ibrahim, who assumed the premiership in November 2022, has projected the economy to grow by 4 to 5 per cent this year.
But recent developments – particularly with the influx of foreign direct investment (FDI) into artificial intelligence (AI) and other high-tech sectors – indicate gross domestic product (GDP) growth could hit the higher end of the range – or even surpass 5 per cent growth this year.
Malaysia’s first-quarter GDP grew faster than expected. GDP grew 4.2 per cent in the period of January to March this year, compared to the same period in 2023.
That 4.2 per cent was higher than market estimates. And it also outstripped growth in the final quarter of 2023, when the economy expanded only 3 per cent year-on-year.
Bank Negara Malaysia had attributed the stronger growth in the first quarter of 2024 to higher household spending, more investments and a rise in tourist arrivals.
And second-quarter growth is showing a similar heartening trend.
On 20 July, Anwar revealed that economic growth for April to June is projected to hit 5.8 per cent, beating earlier estimates. This also stands as the highest growth figure since the second quarter of 2022, which saw 7.4 per cent growth.
With that, the Prime Minister sounded a strong message of optimism.
“Malaysia has broken through the wall of uncertainty by registering an amazing 5.8 percent growth in the second quarter, beyond normal expectations and projections presented by all parties,” he said on his official X account.
He added: “I am confident that with our cooperation and focus on economic development, we will succeed. This will enable us to rise as a strong nation.”
FDI-led recovery on the back of political stability
The recovery in the economy – which was marred by a frequent change of governments from 2018 to 2022 – can be attributed chiefly to Anwar’s business-friendly policies, as shown in investment incentives laid down under various new economic plans.
His pragmatic diplomatic stance in maintaining a neutral stand amid US-China trade war has also helped to lure China-based investments looking for a third country for expansion.
In addition, Malaysia is now experiencing a period of relative political stability, after the chaos from 2018 to late 2022.
Many opposition MPs have pledged support for Anwar’s leadership. And the country’s outspoken new King is also a strong stabilising force.
Sultan Ibrahim Iskandar has called for unity, and has warned politicians against threatening any attempts to upset political stability. He has said he will not entertain any requests that may lead to another political crisis.
“I would like to advise not to drag this country again into another political crisis at a time when the people are facing hardship and an uncertain future as a result of the Covid-19 pandemic,” he said during his speech in parliament in May this year.
On the domestic front, the Prime Minster has introduced reforms to improve governance and the livelihood of the people, giving cash aid to targeted groups, and encouraging employers to raise wages, although some crucial woes – like worries over costs of living – still remain.
On the external front, Anwar made several overseas trips soon after assuming the premiership in November 2022 to woo FDI into the country in a big push to spur economic activity and create jobs.
Anwar’s visit to Beijing and meeting with Chinese President Xi Jinping in early 2023 had won China’s commitment to invest RM170 billion in Malaysia. These investments covered a range of sectors, including infrastructure, renewable energy, telecommunications and tourism.
The potential of attracting massive investment from China sparked a glimmer of hope then. And optimism has skyrocketed since late 2023, after US tech giants started pouring into Malaysia.
The country’s emphasis on building a digital economy, and developing its renewable energy, high-tech and artificial intelligence (AI) sectors has attracted the attention of these giants.
Following the entry of AI chip giant Nvidia in late November 2023, other US tech titans that announced multi-billion investments in Malaysia included Google and Microsoft. In June, TikTok owner ByteDance was reported to be planning to invest RM10 billion in the country.
The influx of these prominent tech players will help develop Malaysia’s AI ecosystem. This will mean the need for more computing power, construction of data centres and related infrastructure.
Malaysia is also benefiting from the increased demand for data centres as a result of Singapore’s three-year moratorium on building new data centres due to the limited availability of land, according to Moody’s Ratings.
Prudent economic management
Anwar’s management of the economy is also winning applause. His move to reform and cut the huge diesel subsidies augurs well for Malaysia’s public finance and fiscal health.
And concerns over the high government debt level is being addressed. The Finance Ministry has said Malaysia will continue to reduce its annual fiscal deficit by reducing subsidies and unwarranted expenditure. It will also ensure the debt-to-GDP target will be kept below 60 per cent.
Fiscal deficit is projected to be reduced to 4.3 per cent in 2024, from 5.0 per cent in 2023. In the medium term, the Government aims to achieve a budget deficit of 3 per cent or less, according to the Finance Ministry.
As a result of these policies and initiatives, Malaysia’s sovereign credit ratings were reaffirmed in June 2024 by S&P Global Ratings at A- and Fitch Ratings at BBB+, with both maintaining their “Stable” outlook.
“The reaffirmation of Malaysia’s sovereign credit ratings and positive economic outlook by S&P and Fitch is testament to the Government’s responsible economic management and how the Ekonomi MADANI reform agenda is delivering positive results,” said Anwar, who is also Finance Minister, on the ministry’s website.
Conviction that Malaysia is turning the corner is reflected in the stock market. International funds, which were net sellers on Bursa Malaysia previously, turned into net buyers of the equities this year.
The property sector is also experiencing a recovery. Hong Leong Investment Bank observed in its research note in July: “A multi-year property upcycle has been set in motion, driven by the rise in industrial developments, providing developers with a new growth avenue.”
A noteworthy feature in the current upcycle is that industrialisation and investments have spread to Johor, Penang, Sarawak, and Kedah.
Sarawak is attracting renewable energy players, while Johor is seeing a renewed interest due to the construction of infrastructure projects brought about by investment in AI data centres.
While Malaysia’s economy is generally expected to perform well this year and next, it still faces challenges that can only be overcome with political will.
Anwar needs to stem corruption, raise competitiveness, adopt an open attitude towards freedom of expression and promote greater unity among its multi-racial population.
Hot off the press
Women are finding – and creating – more space and opportunities to make themselves seen, heard and valued in workplace and in society. They’re breaking barriers, shattering glass ceilings, and paving the way for a more equitable society.
In our Aug/Sept 2024 issue, we shine the spotlight on women. We look at how far women’s rights and opportunities have come in Malaysia, and speak to outstanding and accomplished women who have made waves with their grit, hard work and heart.
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