Malaysia’s growth momentum is expected to be sustained this year and next, driven by resilient domestic demand and a recovery in external demand. Growth is projected to accelerate to 4.7 percent in 2024 and 4.9 percent in 2025. Inflation has moderated but is subject to upside risks from fuel subsidy rationalization. The authorities should be prepared to tighten monetary policy to contain any second-round effects on inflation from the adjustment in fuel prices. Restoring medium-term fiscal space, building up foreign reserves, and accelerating structural reforms will help foster further economic resilience and raise potential growth.

Growth is projected to accelerate to 4.7 percent in 2024 and 4.9 percent in 2025 after a moderation to 3.6 percent last year. The robust growth momentum is supported by strong domestic demand and strengthening export recovery amid the global technology upcycle. Labor market conditions remain favorable. The unemployment rate has fallen to its pre-pandemic level and labor force participation has soared to a record high.