World Bank: Malaysia still a success story despite RM1 trillion debt

KUALA LUMPUR: The World Bank Group still considers Malaysia a “success story” despite its RM1 trillion national debt, says country director for Brunei, Malaysia, the Philippines and Thailand, Mara Warwick.

“We see Malaysia having a very strong economy and moving towards high-income status.

“What we have emphasised in this report (Malaysia Economic Report) is really the importance of looking at the quality of growth, the inclusiveness of this growth going forward, and how every Malaysian can benefit from the economic success the country has achieved,” she told reporters after the launch of the report here today.

Meanwhile, lead economist Richard Record said the most important thing for the new government to do was to ensure that the debt is addressed with transparency, vigilance, as well as careful and prudent management.

He said the size of the debt, which is 97.7% in ringgit denomination, should provide a limited risk to the government when it comes to foreign exchange exposure.

He also said there was a “limited risk on rollover terms” as nearly 70% of the debt is medium-term with a maturity of above three years.

The World Bank’s Malaysia Economic Report has forecast the country’s economy to grow at a rate of 5.4% this year, underpinned by stronger growth in household consumption.

It said the stronger near-term outlook for household spending primarily reflects the additional impetus from the new policy measures put forth by the government, including the temporary suspension of the consumption tax.

The report also said ensuring longer-term fiscal sustainability in the new fiscal setting would necessitate a deeper wave of structural reforms to diversify sources of fiscal revenue, rationalise non-essential operating outlays, restructure some of the large-scale infrastructure projects and improve spending efficiency.

The World Bank has encouraged the government to maintain its fiscal deficit target of 2.8% this year.