11MP macroeconomic strategies to be continued with some adjustments

KUALA LUMPUR: The macroeconomic strategies set out in the Eleventh Malaysia Plan (11MP) will be continued with some adjustments to ensure that economic fundamentals are strengthened, sources of growth secured and structural issues managed.

According to the Mid-Term Review of the 11MP (2016-2020) released by the Ministry of Economic Affairs here yesterday, strategies to address new challenges and leverage new sources of growth, including the Fourth Industrial Revolution, would also be formulated.

It said in the remaining period of the plan, the macroeconomic policy framework would continue to focus on enhancing the resilience of the economy to ensure multidimensional goals are achievable.

“The key macroeconomic strategies include driving productivity at the national, sector and enterprise levels to ensure sustainable and inclusive growth, and promoting quality investments to spearhead economic growth.

“The government will also be embarking on initiatives to move up the value chain, strengthening exports and managing imports to improve the balance of payments and emphasising a fiscal consolidation path to ensure sustainability in the medium-term,” it added.

The report said the fiscal and governance reforms undertaken beginning mid-2018 will have an impact on economic growth, but is anticipated to be short-lived and manageable.

“The short-term growth trade-off is necessary to further strengthen the economy in ensuring more meaningful economic growth for the people,” it added.

On the aggregate demand for the remaining period, the original gross domestic product (GDP) growth target is revised to an average annual rate of between 4.5 per cent and 5.5 per cent, supported by sustained domestic demand, especially from private sector expenditure.

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“Based on the growth target, gross national income (GNI) per capita is expected to reach RM47,720 or US$11,700 in 2020, in line with moderate inflation.

“This is about six per cent below the estimated minimum income threshold of a high-income nation,” it said adding, Malaysia is expected to achieve this income threshold by 2024.

The report also highlighted that private consumption will continue to be a major source of growth and is expected to expand at an annual average rate of seven per cent with the share to GDP reaching 56.9 per cent in 2020 based on the favourable labour market conditions and continued growth of income levels.

The government will further strengthen the ecosystem for private investment to continue as the growth catalyst, with a targeted growth of 5.7 per cent per annum and the contribution to GDP increasing from 12.3 per cent in 2010 to 17.8 per cent in 2020.

“Efforts will be continued to ensure quality private investments that create more high-paying skilled jobs, particularly in the manufacturing and services sectors.

“Thus, measures to encourage investment in machinery and equipment, especially in automation, will be implemented to enhance capacity and productivity of enterprises,” the report noted.

On international trade, the growth of gross exports is expected to be sustained at an annual average rate of 6.2 per cent, supported by firmer commodity prices and continued demand from trading partners.

Gross imports are estimated to rise by 6.1 per cent per annum, led by imports and intermediate goods.

Strategies and measures will be implemented to enhance exports and manage imports to ensure the trade balance remains in surplus, targeted at RM118.3 billion in 2020.

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Meanwhile, the current account of the balance of payments is projected to remain in surplus at RM39.9 billion or 2.5 per cent to GNI in 2020 compared with RM40.3 billion or 3.1 per cent to GNI in 2017.

“Higher surplus in the goods account amid continued deficit in the services and income accounts are expected to contribute to the increase in the current account surplus,” the report said.

It said that the federal government will undertake measures to strengthen its medium-term fiscal position, among others, by strengthening the management of public debt and accelerating institutional reforms.

These measures will be balanced with the need to sustain growth and deliver quality public services in ensuring the wellbeing of the people.

While the reforms of the new administration may have a short-term impact on the nation, it is a necessary trade-off to steer the economy on a sustainable path in ensuring more meaningful growth for the people.

Growth objectives will be pursued simultaneously with social and distributional dimensions of development for Malaysia to become a developed economy and inclusive nation.

The report was presented in Parliament today by Prime Minister Tun Dr Mahathir Mohamad. — Bernama