PETALING JAYA: Malaysia’s economy is projected to grow between 4.5% and 5.5% per annum for the next five years under the 12th Malaysia Plan (12MP), the economic blueprint for the country for 2021-2025.

       This growth will be supported by strong domestic demand and a higher contribution from the external sector, according to the 12MP document themed, “Resetting the economy; Strengthening security, wellbeing and inclusivity; and advancing sustainability”.

       Under the 12MP, the total development expenditure allocation was estimated to be RM400bil.

       However, allocations for basic development expenditure in 2021 and 2022 are expected to be challenging, noted the document, which was released yesterday.

       The fiscal balance is expected to remain in deficit at between 3% and 3.5% of gross domestic product (GDP) in 2025.

       “Fiscal policy will be expansionary in the short-term to revitalise the economy after the Covid-19 pandemic. Fiscal consolidation will resume once the economy is on a better footing to ensure long-term fiscal sustainability,” the document said.

       Malaysia’s GDP recorded moderate average annual growth rate of 2.7% under 11MP (2016-2020), weighed down by the impact of the Covid-19 pandemic. Fiscal deficit stood at 6.2% of GDP by end-2020.

       “Against the backdrop of the challenging economic environment, including expectation of a prolonged and uncontainable Covid-19 pandemic, the Malaysian economy is expected to recover in line with the measures to reopen the economic sectors.

       “Private sector activity will rebound and remain the anchor of growth supported by accommodative monetary and fiscal policies. Labour market conditions are expected to improve with full employment in the 12MP, while inflation is projected to be stable,” the 12MP document said.

       Potential output is expected to expand between 4% and 5% under 12MP.

       Gross national income (GNI) per capita is expected to increase 6.4% per annum to RM57,882 (US$14,842) in 2025 from RM42,503 (US$10,111) in 2020. In general, the 12MP aims to strengthen Malaysia’s economic resilience to better withstand current and future challenges in attaining the objectives of the Shared Prosperity Vision 2030.

       “Macroeconomic strategies will focus on enhancing productivity, promoting quality investment, accelerating structural economic transition, increasing participation in the global value chain and ensuring long-term fiscal sustainability,” the document stated.

       “Achieving greater regional balance will remain a priority to reduce disparity among states and green growth will be further emphasised in line with the 2030 agenda,” it added.

       Under 12MP, private investment will rebound and is expected to grow at 3.8% per annum or an average of RM258bil, compared with RM233bil during 11MP. It will become the catalyst of economic growth after the slowdown in 2019-2020.

       Public investment, on the other hand, is expected to grow at 2.6% per annum or an average of RM80bil, driven by federal government development expenditure and capital spending of non-financial public corporations (NFPCs). The investment will be largely in infrastructure, transport, utilities as well as the oil and gas industry.

       Public consumption is expected to expand by 3.7% per annum, in line with the measures taken to reduce the impact of the Covid-19 pandemic and stimulate the economy.

       The current account of the balance of payments is projected to remain in surplus at RM44bil, or 2.2% of GNI, in 2025, supported by higher surplus in the goods account despite the continued deficit in the services account.

       Malaysia’s trade performance is expected to improve in tandem with the expected recovery in global trade and the strengthening of major commodity prices.

       Gross exports are projected to increase at an average annual rate of 5% supported by higher value-added products and diversification of markets.

       Gross imports are estimated to expand at an average annual rate of 5.9% in line with strong exports performance and higher domestic investment activities, which will require more imports of intermediate and capital goods.

       The trade surplus is expected to remain substantial at RM191bil in 2025.

       The services and manufacturing sectors will continue to be the main drivers of the economy under 12MP, while the agriculture sector will be reinvigorated to support the downstream activities and to enhance food security.

       In general, the services sector is expected to grow 5.2% per annum and constitute 58.3% of GDP in 2025.

       The manufacturing sector is expected to expand 5.7% per annum, led by the export-oriented subsector.