17 Mar - 4 min read
The World Bank has said that Malaysia is likely to cross the high-income country threshold between 2024 and 2028, depending on the nation’s economic growth over the following years.
Revealed in its latest report “Aiming High – Navigating The Next Stage Of Malaysia’s Development”, the World Bank specified that Malaysia could achieve the new status by 2025 in a baseline scenario, provided that the economy enjoys healthy growth in the next few years. Alternatively, the nation will cross the threshold in 2024 under exceptionally vigorous economic expansion (high-case scenario), or 2028 under a less robust progress (low-case scenario).
The World Bank further clarified that the baseline projection is made based on the assumption that Malaysia’s economy will continue to expand around its potential growth rate, and that the ringgit-US dollar exchange remain unchanged at about RM4 to US$1 throughout the forecast period. Meanwhile, the high-case scenario is predicted based on elevated gross domestic product (GDP) growth and exchange rates, with the opposite applicable for a low-case scenario.
Additionally, the report said that the low-case scenario may be more likely because of a few reasons, one of which is the prolonged negative economic impact caused by the Covid-19 pandemic. Aside from that, there are also concerns that Malaysia is deindustrialising prematurely due to a drop in competitiveness in the electrical and electronics sector, as well as in manufacturing and exports in general. This, in turn, undermines the country’s long-term growth prospects.
That said, the World Bank also noted that Malaysia’s gross national income (GNI) per capita is estimated to reach US$11,200 (approximately RM46,150) in 2020 – only US$1,335 short of the current threshold level that defines a high-income economy.
In response to the launch of this report, Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz said that Malaysia needs to relook at the way policies are set and the roles of government and institutions to improve its future socio-economic growth. On top of that, the country must attempt to cultivate a more knowledge-intensive and productivity-driven growth.
“I am aware that Malaysians aspire to have not just a high-income economy but also one that delivers meaningful improvements in living standards for the whole population. Malaysians increasingly aspire for both economic and social wellbeing – a high standard of living, not just high incomes; fulfilling jobs, not just something that pays the bills. And better public service delivery, not just the existence of such services,” said the minister.
Meanwhile, Minister in the Prime Minister’s Department (Economy) Datuk Seri Mustapa Mohamed commented that the factor-driven growth that has buoyed the country to the cusp of attaining high income status is no longer enough to carry it past the high-income threshold. He said that this type of growth is becoming more costly to sustain as every unit of input injected into the economy now yields less GDP growth compared to the past.
“New sources of growth are needed to ensure that it is driven by multifactor productivity. We need to build a workforce for the future, drive digitalisation and spur productivity improvements at the sector and enterprise levels. With this in mind, Malaysia has strengthened its resolve in intensifying the digitalisation journey that first began with the Multimedia Super Corridor and [now] the Malaysia Digital Economy Blueprint (MyDigital) launched by the Prime Minister on 19 February,” said Datuk Seri Mustapa.
The minister also added that the challenge now lies in finding ways to do things differently, creatively, and innovatively. As such, Malaysia needs to learn from its shortcomings, do things better, as well as consider the best practices in other nations.