KUALA LUMPUR (March 16): Malaysia is expected to cross the high-income country threshold by 2025 under a baseline scenario, on the basis that the economy continues to expand healthily in the next few years, said World Bank.
Under a high case scenario, this could be achieved earlier in 2024, whereas under a low case scenario the achievement could be later in 2028, World Bank said in a new report released today.
According to World Bank, the baseline projections are premised on assumptions that Malaysia’s economy will continue to expand at around its potential growth rate, with the ringgit-US dollar exchange rate remaining unchanged at around RM4 per US dollar throughout the forecast period.
The high case scenario assumes stronger profiles for gross domestic product (GDP) growth and ringgit exchange rates, while the opposite is the case for the low episode scenario.
Malaysia’s Ministry of Finance is targeting for the economy to grow between 6.5% and 7.5% in 2021.
“Malaysia’s per capita income has increased nearly four-fold since joining the upper middle-income country group in 1992.
"Since then, progress has slowed despite continued growth in ringgit-denominated incomes, largely due to the weakness of the ringgit relative to the US dollar in recent years. In 2020, Malaysia‘s average gross national income (GNI) per capita is estimated to reach US$11,200, only US$1,335 short of the current threshold level that defines a high-income economy,” the report said.
World Bank noted that one factor that would make the low case scenario more likely would be a prolonged negative impact from the Covid-19 pandemic on Malaysia’s rate of economic growth.
Loss of competitiveness in the electrical and electronics sector, and in manufacturing and exports more generally, has also given rise to concerns that Malaysia is deindustrialising prematurely, which has the potential to undermine the country’s long-term growth prospects.
It said a revamp of the “growth with equity” model through timely reforms can substantially improve Malaysia’s growth potential.