This growth has been attributed to higher household spending amid continued growth in employment and wages, higher capital spending and a rebound in exports.
Most forecasts point to an improvement in economic growth in 2024 over 2023.
In an analysis published on Feb 27, Ratings Agency Malaysia projected a growth rate of 4.5% to 5.5% in 2024, up from 3.7% recorded in 2023.
The nation thrives on the back of an improvement in productivity in four pivotal sectors of the economy, namely palm oil, manufacturing, services as well as oil and gas (O&G).
Palm oil
The role of palm oil as a major contributor to gross domestic product (GDP) growth in Malaysia cannot be overstated.
In 2022 alone, Malaysia exported around 15 million metric tonnes of palm oil and palm oil-based products valued at around RM137 billion.
Overall, the sector contributes about RM40 billion annually to the GDP.
Palm oil anchors the Malaysian agricultural output and global trade, making the country the world’s second largest producer of the commodity.
Manufacturing
The manufacturing sector, which includes the chemicals, automotive as well as electrical and electronics (E&E) sub-sectors, is one of the largest contributors to the economy, accounting for RM1.2 trillion of the GDP, a reflection of the country’s large industrial base.
With almost 30 producers and more than 600 component manufacturers, the Malaysian automotive industry is among the largest in Asia.
Annually, it contributes about RM40 billion to the GDP. Homegrown brands Proton and Perodua are the leading players locally.
The chemical sub-sector is projected to contribute RM40 billion to the GDP by the end of the decade through enhanced industry integration, improved global competitiveness and sustainable production, trade and investment minister Tengku Zafrul Aziz said last August.
The E&E industry is the backbone of the Malaysian manufacturing sector, accounting for 5.8% of the GDP in 2023, according to the Malaysian Investment Development Authority (Mida).
The target is for the sector to contribute RM120 billion to the GDP and RM495 billion in export earnings by 2025.
Malaysia is a leading player in the E&E market in Southeast Asia, and acts as a catalyst for the development of other industries and enhances the supply value chain, according to Mida in a Feb 27 report.
Services
The services sector, comprising tourism, finance and ICT, is by far the single largest contributor to the economy by percentage, accounting for close to 55% of GDP growth annually.
The tourism sub-sector alone is a major contributor to economic input. In 2023 tourism revenue alone amounted to US$16 billion (RM75 billion).
The Malaysian finance sub-sector is among the most stable in the region.
A five-year BNM blueprint that sets out the national development priorities for the sub-sector is anchored on efforts to foster market dynamism with continued focus on monetary and financial stability.
The ICT sub-sector is yet another big player. The market for ICT services was valued at US$25.92 billion (RM121.72 billion), according to various global databases, underscoring the country’s shift towards a knowledge-based economy.
Oil and gas
Malaysia has many natural resources and has relied extensively on extracting these resources to keep the economy pumping even before independence.
Tin, which was first discovered in Larut, Perak, in 1848, was a major driver of the economy for more than a century.
But oil and gas are now the mainstay, the jewel in the natural resources crown.
Petronas is the main driver of the O&G sector in Malaysia today, but it was global oil company Shell that gave the country its start in the business.
Oil was first discovered on Canada Hill, Miri, by Marcus Samuel and Company, which was later renamed Shell, in 1910.
The first oil well, dug by Shell, pumped out 83 barrels per day.
Among other major oil companies that have invested in the upstream segment of the O&G sector in Malaysia, some in collaboration with Petronas, are Exxon-Mobil and Hess Corporation of the US, PTT Exploration and Production Public Co Ltd of Thailand and EnQuest of the UK.
Today the O&G sector contributes around RM300 billion to the country’s economy.
It has navigated global market volatilities over the years to remain a major source of revenue and employment for Malaysians, reinforcing its status as a critical pillar of the economy.
The O&G sector has contributed significantly to Malaysia’s economic growth at national and state levels.
In states such as Sarawak, Sabah, Terengganu and Johor, Petronas has been involved in training local vendors and its presence in those states has brought huge economic benefits to the local communities.
Working together as a nation
The rapid economic growth in Malaysia rides on the back of a strong partnership between the federation and the various states, with strong policies outlined at the national level to ensure that each state benefits from the various resources produced in the country.
Oil is largely extracted in or off the coast of only a few states, but even non-producers of the commodity share in its benefits.
Every state, even those that do not have natural resources, contribute equally to the economy.
For instance, states such as Penang and Selangor are leaders in the manufacturing sector, while Sabah, Sarawak and Johor are the largest producers of palm oil.
Collectively, these sectors contribute to the strength and stability of the nation’s economy.
As one people, all Malaysians play a role in its growth and share in its benefits.