KUALA LUMPUR: Malaysia remains committed to further strengthening policy buffers and reducing vulnerabilities, in the face of global growth uncertainties and increasing risk of international financial market and capital flow volatility.
Marzunisham Omar, who is executive director for Malaysia in the International Monetary Fund (IMF), said the fiscal policy would continue to be centred on sound public finances while remaining supportive of policies for sustainable and balanced economic growth.
The government will continue with the structural reform agenda as outlined in the 11th Malaysia Plan to transform Malaysia into a high-income economy by 2020.
The economy is expected to expand four to 4.5 per cent this year, driven mainly by domestic demand from the private sector.
Marzunisham said investment activity would come from both the private and public sectors.
On external demand, he said manufactured and services exports were expected to improve, benefiting from the gradual improvement in growth in the United States, euro area and the region.
“The impact of China’s gradual economic rebalancing on Malaysia’s growth (which IMF’s analysis implied could reduce Malaysia’s growth by 0.12 percentage points this year) is manageable,” he said in a statement.
Marzunisham also pointed to potential for upside risks, saying China’s rebalancing posed some uncertainties in the near term with the shifting patterns of consumption and trade.
The transition expected transition will present significant opportunities for the Malaysian economy over the medium term, with the healthcare, education and tourism sectors likely to benefit.
“The ongoing recovery in advanced economies and continued healthy growth in most regional economies also pose upside risks.”
He said the fiscal consolidation course remained intact and further reforms would help contain the Federal Government’s debt-to-gross domestic product ratio to within 55 per cent.
On contingent liabilities, Marzunisham said the growth had been on a declining trend, with guarantees extended for productive and strategic investments.
These included guarantees to the National Higher Education Fund Corporation (19.8 per cent of total government guarantees) and guarantees to DanaInfra Nasional Bhd and Prasarana Malaysia Bhd (11.6 per cent and 9.9 per cent, respectively), which fund Malaysia’s public transport infrastructure projects.
The other portion of guarantees is for government-linked companies or statutory bodies with sound financial performance, minimising the probability of contingency risks materialising.