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Economic and political overview

Economic Overview

Malaysia has successfully transformed its economy, shifting from an agriculture and commodity-based economy in the 1960s to one driven by manufacturing and services sectors. Figures from the Central Bank show that GDP grew by 5.1% in 2024 (up from 3.6% in 2023), driven by strong domestic demand and a rebound in exports. Domestic growth was supported by higher household spending, backed by favourable labour market conditions, supportive policy measures, and healthy household balance sheets. Investment growth was bolstered by strong investment approvals and progress in multi-year projects by both the private and public sectors. Externally, exports recovered thanks to steady global growth, a continued tech upcycle, and higher tourist arrivals and spending. This supported the current account, leading to a surplus of 1.7% of GDP in 2024 (up from 1.5% in 2023). Growth is expected to slow to 4.7% in 2025, due to a moderation in investment growth, partly driven by increased global uncertainty.

Concerning public finances, the 2025 budget projects a reduction in the federal government deficit to 3.8% of GDP, down from an estimated 4.3% in 2024. Fitch Ratings expects federal government revenue/GDP to remain stable at 16.5% in 2025, with new measures like a tax on individual dividend income and an enhanced sales and service tax generating limited additional revenue. This will be partly offset by lower petroleum-related revenue, projected to account for 18% of total revenue in 2025. The debt-to-GDP ratio decreased to 68.4% in 2024 (from 69.8% one year earlier) amid nominal GDP growth and is expected to remain stable over the forecast horizon (IMF). Inflation has remained stable at around 2% (year-on-year) in 2024. With the expected implementation of RON95 gasoline subsidy reforms in mid-2025 and tighter labour market conditions, average headline inflation is projected to increase to 2.6% in 2025 (IMF's latest available data). Risks to this outlook are mainly to the upside, including potential global commodity price shocks and wage pressures from increases in the minimum wage and civil servants' pay.

Malaysia is on track to achieve high-income status by 2026. The country has one of the highest standards of living in Southeast Asia and a low unemployment rate estimated at 3.5% in 2024 (IMF), but the youth unemployment rate is more than triple (10.4%, Statistics Malaysia) and rural youth is not counted statistically. Despite substantial reductions in poverty and a narrowing of income gaps among ethnic groups over the past five decades, notable regional disparities persist in both income and human capital outcomes in Malaysia. Overall, the IMF estimated the country’s GDP per capita (PPP) at USD 41,021 in 2024.

 
Main Indicators 2023 (E)2024 (E)2025 (E)2026 (E)2027 (E)
GDP (billions USD) 399.71439.75488.25522.25553.08
GDP (Constant Prices, Annual % Change) 3.64.84.74.44.0
GDP per Capita (USD) 12,09113,14214,42315,25615,982
General Government Balance (in % of GDP) -4.7-3.7-3.6-3.6-3.5
General Government Gross Debt (in % of GDP) 69.868.468.168.268.8
Inflation Rate (%) 2.52.82.52.22.0
Unemployment Rate (% of the Labour Force) 3.63.53.53.53.5
Current Account (billions USD) 6.1811.5513.7915.2616.68
Current Account (in % of GDP) 1.52.62.82.93.0

Source: IMF – World Economic Outlook Database , October 2021

Country Risk

See the country risk analysis provided by La Coface.

 

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Main Sectors of Industry

Since gaining its independence in 1957, Malaysia has successfully diversified its economy from agriculture and commodity-based to solid manufacturing and service sectors. It had a labour force of 17.2 million people out of a 35.1 million population in 2024. Agriculture employs around 10% of Malaysians and contributes to 7.8% of GDP (World Bank, latest data available). Malaysia is the second main producer of palm oil and tropical wood, and the fifth largest exporter of rubber. Palm oil, rubber, cocoa, and wood products make up roughly half of the total output, while other key contributors include tropical fruits and rice. The poultry and pork industries are well-developed and relatively strong. The country depends on cereal imports, as local production covers only a quarter of consumption. For 2024/25 (July–June), imports are forecast at 7 million tonnes, 6% above average. Maize imports, the largest share, are projected at 3.7 million tonnes, while wheat imports are expected to reach 1.7 million tonnes, up 9% due to rising demand for bread and bakery products. Rice imports in 2024 are set to rise to 1.8 million tonnes due to lower domestic production (data FAO).

Industry contributes to around 37.7% of GDP and employs nearly 28% of the active population (World Bank). Malaysia is one of the world's largest exporters of semiconductor devices, electrical goods and appliances, and the government has ambitious plans to make the country a key producer and developer of high-tech products, including software. The country is a major outsourcing destination for components manufacturing and has attracted significant foreign investment, which played a major role in the transformation of its economy. Malaysia's industrial production index grew 3.8% in 2024, up from 0.7% in 2023, driven by growth across all sectors. The Department of Statistics Malaysia reported a 4.4% rise in the manufacturing index, while the mining and electricity indices increased by 0.7% and 5.6%, respectively.

The service sector employs the majority of the active population (over 62%) and accounts for 53.4% of GDP (World Bank) which is due mainly to healthcare services, transport, distributive trade and tourism. Tourism is one of the main contributors to Malaysia’s GDP, comprising around 15% of GDP. In 2024, the country recorded just over 25 million international tourist arrivals, marking a 24.2% increase from the previous year. Figures from the Ministry of Economy show that retail trade grew 6.1% to MYR 764.9 billion in 2024, wholesale trade rose 4.7% to MYR 782.1 billion, and motor vehicle sales increased 6.5% to MYR 219.1 billion.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 9.8 27.8 62.4
Value Added (in % of GDP) 7.8 37.7 53.4
Value Added (Annual % Change) 0.7 1.3 5.2

Source: World Bank - Latest available data.

 
Monetary Indicators 20162017201820192020
Malaysian Ringgit (MYR) - Average Annual Exchange Rate For 1 USD 4.154.304.044.104.20

Source: World Bank - Latest available data.

 

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Foreign Trade

Malaysia is well known for its openness to international trade, which represents roughly 132% of its GDP (World Bank, latest data available), making the country vulnerable to external demand. In 2023, Malaysia’s manufactured goods exports exceeded MYR 1 trillion for the third consecutive year, reaching MYR 1.217 trillion (85.4% of total exports). Electrical and electronic products (E&E) led with a 40.4% share, while mining and agriculture goods accounted for 7.4% and 6.6%, respectively. The top five manufactured exports in 2023, making up 63.4% of Malaysia’s total exports, were E&E products (MYR 575.45 billion, -3% y-o-y), petroleum products (MYR 143.49 billion, -11%), chemicals (MYR 71.46 billion, -11.3%), machinery and equipment (MYR 57.28 billion, -5.2%), and metal manufactures (MYR 56.33 billion, -11.4%). In 2023, the three main import categories accounted for 70.5% of total imports: intermediate goods (MYR 620.87 billion, 51.2% share, -12.1% y-o-y) due to lower non-transport capital goods imports; capital goods (MYR 128.83 billion, 10.6% share, +7.2%) driven by higher non-transport capital goods imports; and consumption goods (MYR 104.1 billion, 8.6% share, +0.1%) boosted by rising processed food and beverage imports (data Malaysia External Trade Development Corporation).

In terms of countries, the main export destinations were Singapore (15.4% of total exports), China (13.5%), the United States (11.3%), Hong Kong (6.3%), Japan (6.0%), and Thailand (4.1%); whereas imports came chiefly from China (the largest import source since 2011, accounting for 21.3% of the total), Singapore (11.9%), the United States (7.4%), Japan (5.9%), and Indonesia (5.0% - data Comtrade). ASEAN remained a key trading partner for Malaysia, taking up 27.3% of Malaysia’s total trade in 2023, while the EU accounted for 7.8%. The government supported the creation of the Trans-Pacific Partnership (TPP), a multilateral free-trade agreement negotiated between Asia-Pacific and North American countries. The treaty, signed by Malaysia and eleven other nations in order to boost inter-regional trade, was renamed the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP) after the withdrawal of the United States in January 2017 and ratified by the Malaysian government in 2022. In 2020, Malaysia has signed the Regional Comprehensive Economic Partnership (RCEP) with 14 other Indo-Pacific countries. This free trade agreement is the largest trade deal in history, covering 30 per cent of the global economy. It includes the Association of Southeast Asian Nations (ASEAN: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam) and ASEAN’s free trade agreement partners (Australia, China, India, Japan, New Zealand and the Republic of Korea). The RCEP covers goods, services, investment, economic and technical cooperation. It also creates new rules for electronic commerce, intellectual property, government procurement, competition, and small and medium-sized enterprises.

According to WTO data, exports of goods amounted to USD 312.8 billion and imports reached USD 265.7 billion in 2023 (-11.1 and -9.5% y-o-y, respectively). With regard to services, Malaysia exported USD 42.5 billion (+34.2%) and imported USD 51.7 billion (+16%). The overall trade balance was estimated to be positive by 5.1% of GDP (from 7.2% one year earlier - World Bank). According to preliminary figures from Statistics Malaysia, exports, imports, and total trade for January to December 2024 increased by 5.7%, 13.2%, and 9.2%, respectively, compared to the previous year. However, the trade surplus fell by 36.4%.   

 
Foreign Trade Values 20192020202120222023
Imports of Goods (million USD) 204,998190,860238,240293,797265,755
Exports of Goods (million USD) 238,195234,766299,425352,094312,846
Imports of Services (million USD) 43,71133,38137,08044,59051,754
Exports of Services (million USD) 41,08922,15521,24631,68342,525

Source: World Trade Organisation (WTO) ; Latest available data

Foreign Trade Indicators 20192020202120222023
Foreign Trade (in % of GDP) 123.0116.8134.0146.5132.1
Trade Balance (million USD) 30,12332,82942,81442,42529,960
Trade Balance (Including Service) (million USD) 27,50121,60326,98029,12220,435
Imports of Goods and Services (Annual % Change) -2.4-7.921.216.0-7.4
Exports of Goods and Services (Annual % Change) -1.0-8.618.514.5-8.1
Imports of Goods and Services (in % of GDP) 57.855.263.469.763.5
Exports of Goods and Services (in % of GDP) 65.361.670.676.968.6

Source: World Bank ; Latest available data

Foreign Trade Forecasts 20242025 (e)2026 (e)2027 (e)2028 (e)
Volume of exports of goods and services (Annual % change) 4.45.93.84.14.3
Volume of imports of goods and services (Annual % change) 8.95.83.74.65.0

Source: IMF, World Economic Outlook ; Latest available data

Note: (e) Estimated Data

 
International Economic Cooperation
Malaysia is a member of the following international economic organisations: IMF, Asia-Pacific Economic Cooperation (APEC), ICC, Association of Southeast Asian Nations (ASEAN), Commonwealth, G-15, G-77, WTO, among others. For the full list of economic and other international organisations in which participates Malaysia click here. International organisation membership of Malaysia is also outlined here.
Free Trade Agreements
Malaysia is a member of Regional Comprehensive Economic Partnership (RCEP) signed on 15 November 2020. The complete and up-to-date list of Free Trade Agreements signed by Malaysia can be consulted here.
 

Main Partner Countries

Main Customers
(% of Exports)		 2023
Singapore 15.4%
China 13.5%
United States 11.3%
Hong Kong SAR, China 6.3%
Japan 6.0%
See More Countries 47.5%
Main Suppliers
(% of Imports)		 2023
China 21.3%
Singapore 11.9%
United States 7.4%
Japan 5.9%
Indonesia 5.0%
See More Countries 48.6%

Source: Comtrade, Latest Available Data

 

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Political Outline

Current Political Leaders
King: Abdullah Sultan Ahmad Shah (since 24 January 2019)
Prime Minister: Anwar bin Ibrahim (since November 2022)
Next Election Dates
House of Representatives: November 2027
Current Political Context
Malaysian politics saw significant shifts in recent years. The Barisan Nasional coalition, which had governed since 1957, lost its parliamentary majority for the first time in 2018. The 2022 election resulted in a fragmented political landscape, with no coalition securing a clear majority. Following the King’s intervention, Pakatan Harapan (PH) and Barisan Nasional (BN) formed a coalition, and Anwar Ibrahim, after decades in opposition and a decade-long prison sentence on politically motivated charges, was appointed as the 10th Prime Minister. With the Pakatan Harapan (PH) coalition at its head, Prime Minister Anwar Ibrahim continued to lead the Unity Government in 2024. After years of unrest and fluctuating coalitions, the administration concentrated on bringing political stability. In an attempt to rebuild public confidence in the political system, Anwar's administration continued its efforts to combat corruption through various legal reforms, aiming to restore public trust in the political system.
Together with its neighbours Thailand and Indonesia, Malaysia was formally recognized as a BRICS ‘partner country’ in October 2024. This announcement followed Prime Minister Datuk Seri Anwar Ibrahim's confirmation in July that Malaysia had formally applied for BRICS membership. This action seems to be a component of Anwar Ibrahim's continuous plan to preserve Malaysia's independence and non-alignment from a geostrategic and economic standpoint. Additionally, Prime Minister Anwar Ibrahim aimed to maintain Malaysia's economic connections with China while also reaffirming its sovereignty, especially in the South China Sea, where the two countries share overlapping territorial claims.
Main Political Parties

The currently government relies on the support of the following parties/coalitions:

Alliance of Hope (PH) coalition:
- People's Justice Party (PKR): centre-left
- Democratic Action Party (DAP): centre-left, social democracy
- National Trust Party (AMANAH): centre-left, Islamic modernism
- The United Progressive Kinabalu Organisation (UPKO): multiracial political party based in Sabah

National Front (BN) coalition:
- United Malays National Organisation (UMNO): right-wing, known for being a major proponent of Malaysian nationalism
- Malaysian Indian Congress (MIC): right-wing
- Malaysian Chinese Association (MCA): right-wing, represents Malaysian Chinese contingency

Sarawak Parties (GPS) Alliance:
- Parti Pesaka Bumiputera Bersatu (PBB): right-wing
- PRS
- Progressive Democratic Party (PDP): regionalist
- Sarawak United People's Party (SUPP): centre

Sabah People's coalition (GRS), formed by three regionalist parties: the Sabah People's Ideas Party (PGRS), the Love Sabah Party (PCS), and the Homeland Solidarity Party (STAR).
The Heritage Party, the Social Democratic Harmony Party (KDM), and the Malaysian Nation Party (PBM) also support the government.

The opposition blocked is formed by the National Alliance (PN), comprising:
- Pan-Malaysian Islamic Party (PAS): Islamist, far-right
- Malaysian United Indigenous Party (BERSATU): centre-right, nationalism.
Executive Power
The head of state is the Paramount Ruler, commonly referred to as the King. The King is selected from nine hereditary rulers (called Sultans) of the Malay states to serve a five-year term; the other four states (which have titular Governors) do not participate in the selection. The Prime Minister is typically the leader of the party or coalition that commands a majority in the lower house. If no single party or coalition wins a majority, the King has the discretion to appoint a Prime Minister who he believes is most likely to command majority support in parliament. The Prime Minister is the head of Government and holds the executive powers which include implementation of the law and running the day-to-day affairs of the country. The Cabinet is appointed by the Prime Minister from among the members of parliament with the consent of the Paramount Ruler.
Legislative Power
The legislature in Malaysia is bicameral. The parliament consists of the Senate (the upper house) with 70 seats, out of which 44 are appointed by the Paramount Ruler and 26 are appointed by the 13 state assemblies, to serve three-year terms; and the House of Representatives (the lower house) with 222 seats, its members elected by popular vote to serve five-year terms. The King can dissolve parliament on the advice of the Prime Minister. In general, more power is vested in the executive branch of government than in the legislative branch. Legislative power is divided between federal and state legislatures. Each state has its own Government, a cabinet with executive authority, and a legislature that deals with matters not reserved for the federal parliament.
 

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