Malaysia to become high-income nation by end of decade, says AMRO

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Malaysia is on track to become a high-income nation by the end of the decade, according to the Asean+3 Macroeconomic Research Office (AMRO).

Chief economist Hoe Ee Khor reportedly said that the country is backed by strong inflow of foreign direct investments (FDI) and a robust manufacturing sector. This is especially in the semiconductor industry.

At a virtual media briefing on the release of AMRO's ASEAN+3 Regional Economic Outlook (AREO) 2024 report today, Hoe reportedly said that the FDI inflows in Malaysia in the last few years had spiked in 2021 and 2022, according to Malay Mail. This, according to Hoe, would show up in terms of actual investment in the next few years.

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He reportedly added that as long as Malaysia maintains the fiscal and monetary discipline, the new inflows of investments from overseas will be able to help raise the growth rate and reach the high-income level.

The economist also dubbed Malaysia the 'Silicon Valley' of the East, according to Bernama. He reportedly said that Malaysia is expected to attract more semiconductor industries in the future and will be the major beneficiary of the upswing of the semiconductor cycle.

As for the region, the report forecasts that it will grow at 4.5% this year, up from 4.3% in 2023. AMRO also reportedly projected that the region would expand by 4.2% by 2025.

The stronger growth for ASEAN+3 this year is mainly driven by robust domestic demand, underpinned by increasing household incomes and recovering investment activity.

The anticipated turnaround in exports, due to the global chips upcycle and the continued recovery of tourism will provide additional tailwinds, added the report.

In tandem, AMRO warns against taking the region's positive momentum for granted in light of potential disruptors to the growth trajectory.

“A sudden spike in global commodity prices, weaker-than-expected growth in China, or escalating geopolitical tensions could turn the tide for the region,” said Hoe.

“Now that the current outlook is quite positive, given robust growth and gradual disinflation, ASEAN+3 economies need to rebuild policy space as much as they can.”

AMRO also called on ASEAN+3 economies to work closely together in response to three key secular trends: aging, global trade reconfiguration and rapid technological changes.

“Aging presents a critical challenge for the ASEAN+3 region,” said Allen Ng, AMRO group head and one of the lead authors of the AREO report.

“At the same time, it’s important to recognise that the region is not just aging. We are also living longer and healthier. Adapting to this ‘longevity dividend’ and enabling our populations to age productively will be crucial for the region’s future.”

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