This Survey is published under the responsibility of the Secretary-General of the OECD. The draft report was discussed at a meeting of the Economic and Development Review Committee on 24-25 June 2021, with participation of representatives of the Malaysian authorities. The 2021 OECD Economic Survey of Malaysia was prepared by Kosuke Suzuki, Zahid Ismail, Wan Fazlin Nadia Wan Osman, Sugumar Saminathan, Mohamad Norjayadi Tamam, Zafrulla Hussein, Suraiti Zainal Abidin, Halimahton Sa'diah Let, Mohamad Muzaffar Abdul Hamid, Nurrul Nur Aisyah Hamran, Suhaimi Hamad, Peter Gal, Francesco Losma, Laurence Todd and Eva Tène, under the supervision of Patrick Lenain. It benefitted from contributions at various stages by Alvaro Pereira, Isabell Koske, Cristiana Vitale, Ashikin binti Abdul Razak, Adlina Merican binti Zainuddin Merican, Tan Fung Ling, Zaharel Reeza Bin Ruslan and Mohd Aizuddin Noor Azman. Isabelle Luong provided statistical assistance and Stephanie Henry and Karimatou Diallo provided editorial support. Support from the World Bank and the governments of Malaysia and Japan is gratefully acknowledged. Information about the latest as well as previous Surveys and more information about how Surveys are prepared is available at http://www.oecd.org/eco/surveys.

When the pandemic struck, Malaysia was relatively well prepared thanks to past efforts to build a robust policy framework. Over the past decades, Malaysia showed remarkable commitment to improve its economy and address its social challenges. This commitment remains intact as shown by the upcoming 12th Malaysia Plan 2021-2025, a stepped-up pivot on further reforms.

The COVID-19 crisis has caused a deep economic contraction in Malaysia. A recovery is projected to unfold in the second half of 2021, thanks to government intervention to control the contagion, but mutations of the virus could jeopardise the return to growth. The pandemic has revealed acute policy issues that need to be addressed. Vulnerable groups were hit severely, despite social protection support from the government, and the SME sector has more suffered from the economic downturn than large firms. This chapter discusses the macroeconomic and social impacts of the pandemic and policy responses that will be required to achieve a sustainable and inclusive recovery and progress towards high-income status, including a strategy to decarbonise economic growth.

Before the COVID-19 pandemic, Malaysia undertook a series of vigorous reforms, ranging from the improvement of regulatory framework to the digitalisation of the economy, with the aim of boosting productivity. While the protracted pandemic has inevitably stalled reform efforts in many countries, including Malaysia, strengthening the business climate has become all the more important. This will be essential to achieve a robust recovery, accelerate digitalisation, and adopt a new working environment combining productivity and sanitary precautions. This chapter discusses: 1) how Malaysia can reinvigorate business dynamism with new regulatory reforms; 2) how it can boost the uptake by businesses of digital solutions; and 3) based on the recent experience of teleworking, how it can prepare an enabling working environment for the digital age.