Malaysia will only become a high-income economy by 2024, four years later than the original target set by the previous Barisan Nasional administration as income and economic growths would not be sufficient to lift the status of the country.
The nation’s GDP is expected to expand between 4.5% and 5.5% annually from 2018 until 2020, which will fall short of the per capita income required for a developed nation status.
Under the midterm review of the 11th Malaysia Plan (11MP), the country’s per capita income is expected to reach RM47,720 or US$11,7000 in 2020, below the US$12,235 threshold set by World Bank.
Based on the projected growth rate, Malaysia will only breach the threshold in 2024.
“However, the goal to become a developed and inclusive nation goes beyond attaining a high-income level, as it must also be accompanied by higher purchasing power.
“At the same time, the aspiration of becoming a developed nation requires Malaysia to progress in many other dimensions, such as economics, politics, culture, psychology, spiritual and social,” according to the report released yesterday.
The 11MP midterm review has identified six pillars to position the country future-proof with 19 priority areas and 66 strategies. It was tabled at the Dewan Rakyat last Thursday by Prime Minister Tun Dr Mahathir Mohamad.
Malaysia’s economic growth between 2018 and 2020 will be sparked by productivity rise and sustained domestic demand, as outlined in the revised macro multidimensional goals set in the midterm review.
“These goals will be pursued together with qualitative aspects through the various respective policy pillar to ensure an inclusive growth,” the report said.
The midterm review also highlighted that immediate fiscal and governance reforms are imperative to further strengthen the government’s fiscal position and allocate more resources to improve the socioeconomic development.
Swift implementation of the reforms is necessary to ensure sustainability of the economy, the report stated.
The government would continue to implement structural policy measures, high-impact development programmes and projects in a more transparent and sustainable manner.
The report also highlighted the flaws in the country’s economy, especially the widening disparity.
The report said despite the economy performing well at the macro level in 2016 and 2017, disparities across the states and the low income level of the bottom 40% (B40) households, as well as long-standing structural economic issues, continued to prevail.
“Although inflation was relatively low, the cost of living was rising and caused further hardship to the B40 households. The unemployment rate among the youths was relatively high, despite full employment,” the report stated.
It highlighted that structurally, most industries remained in the lower-end of the production value chain despite being provided various incentives, hence limiting the creation of skilled jobs.
“The situation was exacerbated due to easy access to low-skilled foreign workers that deterred industries from upgrading towards capital intensive (segments), further dampening wage growth.
“Those challenges, among others, have affected the purchasing power and impacted the wellbeing of the rakyat, as well as hampered efforts towards achieving a developed and inclusive nation.
The midterm review stated that the prevailing challenges were compounded with the revelation of improper fiscal practices, allegations of corruption and other issues on governance committed by the previous government.
In addition, the previous official data on public debt, which did not take into account contingent liabilities and commitment from financial leases, did not reflect the full financial obligations of the federal government.
“This resulted in a trust deficit towards the previous government,” the report said.
– The Malaysian Reserve