World Bank2014-01-082014-01-082013-06https://hdl.handle.net/10986/16529Following a strong performance in 2012, Malaysia's economy hit a soft patch in the first quarter of 2013. Economic growth has been supported by the strong, broad-based performance of domestic consumption and investment from public and private sources. The acceleration of investment growth has been a key feature of the recent growth trend. Public and private consumption has also underpinned growth. Accommodative fiscal and monetary policies have supported both higher (real) household incomes and sustained credit growth, which along with firm labor markets provided a solid backdrop for consumption growth even as agricultural commodity prices declined. Despite significant expenditure overruns, the government met its fiscal deficit target for 2012. Supply-side factors kept inflation subdued amidst robust domestic demand. Monetary authorities emphasized macro-prudential regulation as the policy interest rate continued to be pulled in two directions. Malaysia is likely to continue posting solid growth rates in 2013 and 2014. Growth in 2013 is projected to come at 5.1 percent, supported by the strong momentum in investment growth, still-accommodative fiscal and monetary policies, higher household income due to tight labor markets, and modest improvement in the export sector. The sustainability of Malaysia's favorable near-term prospects into 2015 and beyond continues to hinge on the implementation of structural reforms. Having a rigorous investigation of the effectiveness of various tax incentives across different industries, and comparing the benefits with the costs in foregone revenues, will provide important lessons, to Malaysia and other countries, of the appropriate role for fiscal incentives in horizontal diversification.en-USCC BY 3.0 IGOADVANCED ECONOMIESAGRICULTUREASSET PRICEASSETSBANKING SECTORBANKING SYSTEMBENCHMARKBENCHMARK INTEREST RATEBENEFIT ANALYSISBILLSBONDSBUFFERBUFFERSCAPITAL ACCUMULATIONCAPITAL FLOWSCAPITAL GOODSCAPITAL GOODS IMPORTSCAPITAL INFLOWSCAPITAL MARKETSCAPITAL OUTFLOWSCARBONCARBON EMISSIONSCENTRAL BANKCENTRAL BANKSCLIMATE CHANGECOMMODITY PRICESCOMPARATIVE ADVANTAGECOMPETITIVENESSCONSOLIDATIONCONSUMER DEMANDCONSUMER PRICE INDEXCONSUMER PRICE INFLATIONCONSUMPTION EXPENDITURECONSUMPTION GROWTHCORPORATE INCOME TAXESCPICURRENCYCURRENCY ASSETSCURRENCY SWAPSCURRENT ACCOUNTCURRENT ACCOUNT BALANCECURRENT ACCOUNT SURPLUSDEBTDECLINE IN INFLATIONDEFICITSDEFORESTATIONDEPOSITSDEPRECIATIONDEVELOPMENT ECONOMICSDIRECT INVESTMENTSDOMESTIC CONSUMPTIONDOMESTIC CURRENCYDOMESTIC DEMANDDOMESTIC DEMAND GROWTHDRAG ON GROWTHDUTCH DISEASEECONOMIC ACTIVITYECONOMIC CONDITIONSECONOMIC COOPERATIONECONOMIC DEVELOPMENTECONOMIC ENVIRONMENTECONOMIC GROWTHECONOMIC MODELECONOMIC OUTLOOKECONOMIC PERFORMANCEECONOMIC POLICYECONOMIC RESEARCHELECTRICITY GENERATIONENERGY CONSUMPTIONENERGY DEMANDENVIRONMENTALENVIRONMENTAL CONSERVATIONENVIRONMENTAL MANAGEMENTEQUITY MARKETERROR CORRECTION MODELEXCESS CAPACITYEXCHANGE RATESEXPENDITURESEXPORT EARNINGSEXPORT GROWTHEXPORT MARKETSEXPORT PERFORMANCEEXPORT VOLUMESEXPORTEREXPORTSEXTERNAL DEMANDEXTERNAL FACTORSEXTERNAL SHOCKEXTERNAL SHOCKSFEDERAL RESERVEFINANCIAL CRISISFINANCIAL INSTITUTIONSFINANCIAL MARKETSFINANCIAL SECTORFINANCIAL STABILITYFISCAL DEFICITFISCAL POLICYFISCAL POSITIONFISHINGFIXED CAPITALFOOD PRICESFORECASTSFOREIGN ASSETSFOREIGN CURRENCIESFOREIGN CURRENCYFOREIGN CURRENCY ASSETSFOREIGN DIRECT INVESTMENTFOREIGN EXCHANGEFOREIGN INVESTMENTFORESTRYFREE TRADEFREE TRADE AREAGDPGLOBAL DEMANDGLOBAL ECONOMYGLOBAL LIQUIDITYGNPGROSS DOMESTIC PRODUCTGROSS FIXED CAPITAL FORMATIONGROSS NATIONAL INCOMEGROSS NATIONAL PRODUCTGROWTH RATEGROWTH RATESHIGH-INCOME COUNTRIESHOLDINGSIMBALANCESIMPORTIMPORT DEMANDIMPORTSINCOMEINCOME GROWTHINDUSTRIALIZATIONINFLATIONINFLATION RATEINFLATION RATESINTEREST RATEINTERNATIONAL FINANCEINTERNATIONAL RESERVESINTERNATIONAL SETTLEMENTSINTERNATIONAL TRADEINVENTORIESINVESTMENT BANKINGINVESTMENT BOOMLABOR COSTSLABOR FORCELABOR MARKETLABOR MARKETSLAND USELIQUIDITYLIQUIDITY CONDITIONSLIQUIDITY MANAGEMENTLOOSE MONETARY POLICYLOSS OF COMPETITIVENESSLOW INTEREST RATESM3MACROECONOMIC MANAGEMENTMACROECONOMIC STABILITYMETALSMONETARY AUTHORITIESMONETARY POLICIESMONETARY POLICYMONETARY TRANSACTIONSNATIONAL INCOMENATURAL CAPITALNATURAL RESOURCENATURAL RESOURCESNET EXPORTSNOMINAL EXCHANGE RATEOILOIL PRICESOIL REVENUESOIL SECTOROPECOPEN ECONOMYOUTPUT GAPPERMANENT INCOMEPRICE CONTROLSPRIMARY COMMODITIESPRIVATE CONSUMPTIONPRODUCERSPUBLIC INVESTMENTPUBLIC INVESTMENTSPURCHASING POWERPURCHASING POWER PARITYRE-EXPORTSREAL APPRECIATIONREAL EFFECTIVE EXCHANGE RATEREAL EFFECTIVE EXCHANGE RATESREAL EXCHANGE RATEREAL GDPREAL GROSS DOMESTIC PRODUCTREAL WAGE GROWTHRECESSIONRECYCLINGREDUCING EMISSIONSRESOURCE MANAGEMENTREVENUE RECYCLINGRISK AVERSIONSECURITIESSHORT-TERM EXTERNAL DEBTSLOWDOWNSLOWDOWNSSPARE CAPACITYSTRUCTURAL REFORMSTRUCTURAL REFORMSSUPPLY SIDESUPPLY-SIDESURPLUSTAXTAX REVENUESTERMS OF TRADETIMBERTOTAL EXPORTSTOTAL IMPORTSTRADE ACCOUNTSTRADE BALANCETRADE GROWTHTRADE PATTERNSTRADING PARTNERSUNCERTAINTIESUNCERTAINTYUNEMPLOYMENTUNEMPLOYMENT RATEVALUATIONWAGESWEALTHWORLD PRICESWORLD TRADEWorld Bank10.1596/16529