KEY FINDINGS
Part 1: "Economic Developments and Outlook".
Malaysia’s economy is expected to grow by 4.9 percent in 2024, up from 3.6 percent in 2023, following a stronger-than-anticipated performance in 1H 2024. This revised forecast is 0.6 percentage points or 14 percent higher than previously predicted, reflecting robust growth in consumption, investment, and trade activity.
Malaysia will continue to face downside risks stemming from the external environment. On the domestic front, the primary downside risks concern the strength of household consumption.
Key labor market indicators in Malaysia have improved, with the national unemployment rate remaining steady at 3.3 percent in Q2 2024, similar to pre-pandemic levels. However, skill-related underemployment (SRU), where individuals with tertiary education work in semi-skilled or low-skilled jobs, has grown significantly over time. Addressing the challenges driving SRU require strategies such as aligning education with industry demands, enhancing Malaysia’s competitiveness, and supporting lifelong skill development.
The Malaysian ringgit has appreciated 11.4% year-to-date against the US dollar, rebounding from its depreciation in 2023, making it one of the strongest-performing currencies in the EAP region.
Malaysia saw higher net foreign direct investment (FDI) inflow in Q2 2024 compared to last year, primarily directed into the services sector. To enhance investor attraction into Malaysia, there are ongoing efforts to minimize operational restrictions and develop Special Economic Zones.
A comprehensive fiscal strategy that enhances government spending efficiency and increases revenue without adversely impacting the poor is crucial for restoring fiscal space to sustainably finance the country’s longer-term spending needs. Fiscal reform efforts must be complemented by effective policy communication to secure broad-based public support for reform.
Part 2: Farming the Future: Harvesting Malaysia’s Agricultural Resilience through Digital Technologies
Malaysia has made significant strides in modernizing its agrofood system, but further efforts are essential for Malaysia to transition into a high-income country.
The agriculture sector needs higher productivity, efficiency, and resilience to support broader economic growth and importantly, ensure Malaysia’s food security amid both growing demand and increasing climate change impacts.
Digital agriculture technologies (DAT) present a transformative opportunity for Malaysia's agrofood sector, promising enhancements in productivity, efficiency, and sustainability.
Realizing the benefits of DAT requires a strategic approach to: i) address digital divides, ii) improve scalability and accessibility, iii) safeguard data privacy and security, iv) enhance collaboration between public and private sectors, and v) increase training and education in digital literacy.
Reflecting this, the special thematic topic identifies specific actions that are tailored to rural areas’ needs, to ensure that the rural economy and agrofood sectors benefit from DAT. These are categorized under three pillars and include:
- Investing in public goods that provide sufficient resources for successfully implementing digital technologies.
Impact: Improved access to information about available agricultural technologies, such as climate-resilient hybrid seed and good production practices, which will lead to higher farm productivity. To adopt new technologies, farmers must know that they exist and how to implement them, and they must believe that they will generate higher returns than traditional agricultural technologies. - Investing in the innovation ecosystem to create an environment that fosters innovation and supports the development of DATs.
Impact: Better jobs through an increased supply of digital solutions, which will attract considerable investor attention and represents a new frontier in farm employment for innovative thinkers. - Creating an enabling environment by formulating clear and actionable strategies for data governance, privacy, security, and an incentive framework. Impact: Increased equity and access within agricultural systems leading to higher farming efficiency.