KUALA LUMPUR: Malaysia needs to move away from being a consumption-driven economy and attract more investments to bolster economic growth.
The World Bank lead economist for Malaysia Dr Apurva Sanghi said the country's economic growth was dependent on private consumption last year.
This came as a result of government fiscal support, namely withdrawals from retirement funds.
Sanghi said the increase in private consumption came at a cost because although withdrawals from the Employees Provident Fund (EPF) played a role in giving the economy a boost amid gloomy global economic conditions, it also affected the people's financial security.
"Growth has been brought up because of consumption rather than investments and consumption had grown in the past two decades.
"It used to be about 40 per cent to gross domestic product (GDP) in the late-nineties but now consumption stands at almost 60 per cent.
"This over-reliance on consumption is not good. One could say Malaysia has become a consumption-driven economy and it needs to pivot to investment growth," he said during a media briefing on the World Bank's latest report on "Malaysia Economic Monitor February 2023".
He said the dependency on consumption-driven growth had been a "structural issue" for Malaysia while the ratio of investments to GDP had "stayed flat" for almost 10-20 years.
"There are investments in Malaysia but they are not as large a fraction of the overall economy as it should be.
"The solution for Malaysia is to get more investments. That is the direction that Malaysia needs to be headed, away from consumption and more to investment," said Sanghi.