Historical Background
Current Status
Key Facts & Figures

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Malaysia's economy set to grow stronger in year 2000.
The Malaysian economy made a remarkable recovery in 1999 after a contraction of 7.5 per cent in its GDP in 1998. GDP recorded a growth of 5.4 per cent in 1999 higher than the earlier forecast of 4.3 per cent. The better than expected performance was due to both external developments and the prompt policy response to reduce the severity of the impact of the financial crisis that befell the nation since the middle of 1997. On the external front, world growth picked up to 3 per cent in 1999. Not only were growth higher in the industrial countries, the economic recovery in Asia was stronger than expected. Both these factors have contributed to a significant strengthening of demand for exports from Malaysia. On the domestic front, the stability in the financial markets which emerged after the introduction of selective exchange controls and the fixed exchange rate on 1 September 1998 provided fundamental support to the process of economic recovery.

Boosted by the stronger volume of exports, the overall balance of payments recorded a significantly larger surplus of RM17.8 billion in 1999 and thereby improved the external reserves.

Accordingly, GNP in current prices grew by 4.2 per cent to RM280.3 billion in 1999 and per capita income increased to RM12,343 in 1999 from RM12,134 in 1998, registering a growth of 1.7 per cent.

Growth in the Malaysian economy is expected to be sustained in year 2000. With a more favourable external environment and the further strengthening of the domestic economy, GDP growth is forecast at 5.8 per cent, an upward revision from the earlier estimate of 5 per cent. Given the strong recovery in the regional economies and the generally favourable world economic outlook, exports are expected to grow at a high level. Other assumptions for growth in 2000 include an expansionary fiscal policy supported by an accommodative monetary policy.

In terms of sectoral performance, the agricultural sector (including forestry and fishing) grew by 3.9 per cent in 1999 compared with its contraction of 4.5 per cent in 1998. The sector's contribution towards GDP stood at 9.3 per cent. Growth in the agricultural sector is attributed largely to the substantial increase (26.8 per cent) in crude palm oil production from 8.3 million tonnes in 1998 to 10.6 million tonnes in 1999 and the increase in production of saw logs, fish and livestock. However, growth in the agricultural sector is expected to moderate to 2 per cent in 2000 due mainly to the slower increase in crude palm oil production as yields will be affected by the downturn in the biological cycle of the oil palm trees. While the production of rubber is projected to decline further, the production of saw logs is forecast to increase to meet the higher external demand, especially from Japan, China and Korea.

In the mining sector, the value added contracted by 4 per cent in 1999 due to lower production of crude oil . Its contribution to GDP declined from 8.1 per cent registered in 1998 to 7.3 per cent in 1999. Natural gas production, on the other hand, turned around to grow by 2.1 per cent due to higher domestic and external demand. Production of tin also increased, spurred on by favourable prices. In 2000, the value added in the mining sector is expected to turn around to record a positive growth of 2.1 per cent, due mainly to higher gas production to meet expectations of higher domestic and external demands.

The manufacturing sector registered a growth of 13.5 per cent in 1999 after contracting by 13.7 per cent in 1998. Output in the export-oriented industries increased by 12.9 per cent bouyed by the strong performance of the electronic goods initially and subsequently by the higher ouput in the electrical products, off-estate processing and textiles and wearing apparel industries. At the same time, the domestic-oriented industries, mainly the transport equipment, construction-related products and chemical products industries also recorded strong growth. Fuelled by the stronger growth in world trade and the recovery in the East Asian economies and the stronger domestic demand, manufacturing output growth is expected to be sustained at 10 per cent in 2000. The continued strong overseas sales orders for electronic products and parts as well as the rapid advancement in information technology applications including E-commerce will continue to contribute to a robust performance by the export-oriented manufacturing industries. In the year 2000, the stronger domestic demand is also expected to drive the performance of the domestic market-oriented manufacturing industries. The transport equipment industry is forecast to be a major contributor to growth among the domestic market-oriented industries as strengthening in consumer confidence is expected to boost demand for motor vehicles. Output growth in respect of non-metallic mineral products and construction-related industries is also expected to recover in tandem with the expected recovery of the construction sector in 2000.

As for the construction sector, for 1999, the value-added declined by a smaller margin of 5.6 per cent compared to the 23 per cent contraction suffered in 1998. Construction activity related to low and medium-cost property reflects the policy emphasis of the government in providing adequate and affordable housing especially to the low-income group. In 2000, the construction sector is expected to recover following extensive civil engineering works associated with government contracts and higher allocations for the construction of low and medium cost properties. Private sector investment in the construction sector is also expected to increase as industries expand to meet stronger sales orders.

In 1999, the services sector recorded a growth rate of 2.9 per cent compared with the 0.8 per cent contraction suffered in 1998. Services provided by the transport, storage and communication sub-sectors for example increased at a faster rate in 1999 basically due to the contribution by the sea transportation services industry as a result of higher trade, considering that 90 per cent of Malaysia's international trade is seaborne. Demand for telecommunications services also improved with increased economic activities. Value added in the service sector is expected to increase by 5.6 per cent in 2000.

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