Will Malaysia’s Growth Continue or Slow?

Malaysia’s challenges, along with the current economic climate, might make some people question whether Malaysia will be able to continue its surge in growth. After the elections in May of 2013, Prime Minister Najib Razak and his ruling United Malays National Organization (UMNO) party was reelected, but with a slim majority. Investors, market watchers and local voters are all looking for indications that the Malaysian government is serious in tackling the country’s challenges.

Given Malaysia’s fiscal situation, the government has decided to implement stricter fiscal regulations which include raising fuel subsidies and postponing some public infrastructure projects. The Prime Minister has also set his goal for the country’s overall GDP growth at about 4.0% to 5.0% growth in 2014.
Malaysia seems to be attempting to put its fiscal issues in order while at the same time convincing both foreign and domestic investors that the necessary reforms are being made to solve these problems. However, one could question whether these reforms are simply a public relations tactic used by the UMNO-led government to please some of the dissatisfied voters from the May 2013 election.

Furthermore, the reduction in government spending at a time when the global economy is slowing may result in the country cancelling or delaying some  public infrastructure projects. These include the cross-border high speed rail system between Singapore and the country, which could help enhance foreign direct investment, tourism, employment and trade. These are benefits that would help make sure that Malaysia remains one of the region’s most important financial centers and a major business destination for many years.