Malaysia has the sixth-largest economy in Southeast Asia and the 39th largest in the world as of 2020. It is a newly industrialised market economy that is relatively open despite being state-oriented. The Malaysian economy has been steadily growing over the past years, by 4.3% in 2019 and 4.8% in 2018. 

The strong performance of Malaysia’s economy in recent years has been attributed to several factors, including improvement in its labour market, sufficient spending on infrastructure, a pro-cyclical budget, and growing global demand for oil and gas, and electronics.   

Unfortunately, the Covid-19 pandemic, coupled with declining government expenditure and lower public and private investments, halted its growth trend in 2020 and even caused the economy to contract. The impact of the pandemic pushed the economy into negative territory, recording -6% growth in 2020. 

Despite this, the IMF forecasts a strong bounce-back for Malaysia this year and expects a 6.5% growth for the year. It also projects growth to stabilise at 6.0% in 2022. The Malaysian government is taking several measures to support its economy, including the rationalisation of subsidies, a fiscal reform program, and additional funds for affordable housing projects.  

GDP Annual Growth Rate (in %)

Malaysia’s population of over 32 million is significantly lower than its neighbouring ASEAN countries such as Indonesia, the Philippines, Vietnam, and Thailand. However, the country’s labour productivity is higher than these nations due to knowledge-based industries and its digital economy and the use of cutting-edge technology for manufacturing.  

Malaysian people enjoy an affluent lifestyle only rivalled by Singapore and Brunei. The government is aiming to raise income per capita to achieve a high–income country status.  

The uptick in the unemployment rate is expected from 3.3% in 2018 and 2019 to 4.5% in 2020, due to restrictions associated with the pandemic. Still, the IMF forecasts a decline to 3.8% in 2021 and 3.6% by 2022.  

Unemployment Rate (in %)

Currency and Central Bank 

Malaysia’s official currency is the Malaysian ringgit or RM, which is divided into 100 sen. Prior to August 1975, it was called the Malaysian dollar and cents in English, until the official names were adopted.  

The Central Bank of Malaysia or Bank Negara Malaysia (BNM) in Malay serves as the country’s central bank. It was founded on January 26, 1959, as Central Bank of Malaya or Bank Negara Tanah Melayu.   

The government’s banker is tasked with issuing currency, formulating monetary policy, regulating Malaysia’s financial institutions and credit system. BNM is currently keeping the key interest rate at a record low of 1.75%.  

Headline inflation has averaged 2.3% year-to-date and is forecast to average between 2.0% to 3.0% for 2021, while underlying inflation is expected between 0.5% to 1.5%. 

Inflation (in %)

Industry and Trade 

Malaysia’s economy has long transitioned from an agricultural-centric phase in the 1960s into an industrial and services-driven one. 

Healthcare services, transport, distributive trade, and tourism are the main drivers of its service sector. It accounts for 54.2% of the country’s GDP in 2020 and employed 63.1% of its labour force.  

Meanwhile, Malaysia’s industrial sector makes up 37.4% of the GDP and provides 26.8% of the workforce. The country is considered one of the largest global exporters of semiconductor devices, electrical goods, and appliances.  

Agriculture employs 10.1% of Malaysia’s labour force. The country is still one of the top producers of palm oil, tropical wood, and rubber. However, its agricultural sector only contributes 7.3% of the GDP.    

Malaysia currently ranks 21st in total exports globally, with integrated circuits, refined petroleum, petroleum gas, semiconductor devices, and palm oil as its main export products. Its top export partners are Singapore, China, the US, Hong Kong, and Japan. 

Meanwhile, the country is ranked 25th in terms of total imports and its top import products are integrated circuits, refined petroleum, crude petroleum, broadcasting equipment, and coal briquettes. China, Singapore, Japan, the US, and Taiwan are its main import partners. 

Balance of Trade

Survey and Rankings 

Malaysia improved its ranking in the World Bank’s 2020 Ease of Doing Business 2020, rising from the 15th spot to the 12th. It increased its overall score from 81.3 to 81.5 and is now 3rd among countries in the East Asia and Pacific region.  

In the Heritage Foundation’s Index of Economic Freedom, Malaysia’s economy went up by two places from 24th freest in 2020 to 22nd in 2021, but its overall score declined by 0.3 points from 74.7 to 74.4. The country remained in the “Mostly Free” category.  

Stock Exchanges and Capital Markets 

Previously known as the Kuala Lumpur Stock Exchange, Bursa Malaysia is the sole stock exchange of Malaysia. It offers a wide range of products, including equities, derivatives, and exchange-traded funds (ETFs).  

In 2006, Bursa Malaysia partnered with FTSE Group to improve its previous Kuala Lumpur Composite Index (KLCI) and develop its current major index, the FTSE Bursa Malaysia KLCI, which is made up of the 30 largest listed companies based on market capitalisation.  

Bond Market 

Malaysia has a highly developed bond market and is the third-largest bond market in Asia, behind Japan and South Korea, in terms of bonds outstanding.   

Over 69% of the bonds outstanding comprise sovereign bonds, including quasi-government issued debt, while the remaining percentage is made up of corporate bonds.  

The government securities issued in the country are Malaysian Government Securities (MGS), Malaysian Government Investment Issues (MGII), Malaysian Treasury Bills (MTB), and Malaysian Islamic Treasury Bills (MITB). 

Local companies are also able to secure financing through the bond market by issuing bonds, medium-term notes, and commercial papers. 

Real Estate Market 

Recently, purchasing real property in Malaysia has become more affordable. This was due to declining asking prices and attractive government incentives. The decline in price was further led by the central bank’s decision to maintain the Overnight Policy Rate at 1.75%.  

While overall prices fell, some areas like Ampang Hilir district of Kuala Lumpur, Damansara Uptown in Selangor, and Jalan Scotland in Penang saw property prices go up.  

At the 2021 Malaysian Housing and Property Summit last July, property experts forecast that transactions will increase by 2022 but prices will remain flatIt was also noted that the value and volume of property transactions went up by 28% and 19.5%, respectively during the first quarter of the year, compared with the same period last year, demonstrating market resiliency. 

Housing Index (in %)


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