Sustained rapid and inclusive economic growth for half a century has brought Malaysia close to the threshold of high-income status. Growth is now accelerating, driven mostly by domestic demand. Exports are also set to rebound amid stronger external demand. The economy has been resilient to recent shocks, and inflation has remained contained. A new fiscal framework provides a good basis for the needed fiscal consolidation, but rising spending needs will require mobilising additional tax revenues. Improving the targeting of social protection while raising social assistance coverage and benefit levels would allow stronger reductions of poverty and inequality. Better access to childcare and a better alignment of tertiary education curriculums with labour market needs would allow more workers, especially women, to participate in the labour market and find jobs that match their skills. Addressing climate change requires phasing out fossil fuel subsidies and a stronger role for carbon pricing, complemented by stricter regulations. Better disaster risk financing and insurance could bolster adaptation efforts.

SPECIAL FEATURES: SMALL AND MEDIUM-SIZED ENTERPRISES; BOOSTING PRODUCTIVITY; SOCIAL PROTECTION; GREEN GROWTH