OECD Maintains Malaysia's 2026 Growth Forecast At 5 Pct, Citing Economic Resilience
PUTRAJAYA, July 28 (Bernama) -- The Organisation for Economic Co-operation and Development (OECD) has forecast Malaysia’s economy to record solid growth of around five per cent on average this year and in 2027 despite global uncertainties.
OECD Country Studies director Dr Luiz de Mello said that while there had been ups and downs in Malaysia’s pace of economic activity, the organisation’s baseline scenario remained positive.
“Malaysia has been very resilient over time, and there have been ups and downs in the pace at which activity is growing, but our forecast is for very solid growth of around five per cent on average this year and next year.
“There is a lot of uncertainty in the world; the conflict in West Asia is still unfolding, and there is uncertainty regarding policy directions in many parts of the world. So we’re all operating in a global landscape that is fraught with uncertainty,” he told reporters after the launch of the OECD Economic Survey of Malaysia here Tuesday.
De Mello said that since Malaysia is a very open economy and integrated into global value chains, any ripple effect from crises in other parts of the world could affect the country.
Regarding fuel subsidies, he said reducing the subsidised fuel quota from 300 litres to 200 was a step in the right direction, as it reduced subsidy spending and strengthened public finances.
“This safeguards public finances because less public money is used on it (the subsidies),” he added.
De Mello said Malaysia should gradually move away from broad-based subsidies and instead provide more targeted assistance to those most in need through direct cash transfers.
He said such an approach would ensure support reaches households that are genuinely unable to cope with rising cost pressures, rather than maintaining general subsidies that are less effectively targeted.
“Malaysia has the means of doing that, as it has a solid base of information about the socioeconomic characteristics of households and the population at large that can be used to achieve that objective.
“We see around the world that countries moving in that direction are achieving the objectives of not only reducing spending and making their public finances stronger but also encouraging or creating stronger incentives for the transition away from fossil fuels in ways that are much more efficient overall to the government and society,” he said.
Commenting on Malaysia’s inflation, de Mello said the OECD recommends that Bank Negara Malaysia maintain a data-dependent monetary policy stance.
“We recommend in the survey that the central bank maintains a data-dependent policy stance that reacts to changes in the inflation outlook as appropriate, so that inflation can be put on a downward trajectory as we expect in our baseline scenario as well,” he said.
Meanwhile, Economy Minister Akmal Nasrullah Mohd Nasir said Malaysia has secured its fuel supply until the end of the year despite the continuing conflict involving the Strait of Hormuz.
“So far we haven’t seen the end of the conflict in the Strait of Hormuz. The longer the conflict is prolonged, the more it will change the structure and our reliance on the Middle East. But at the moment, regarding Malaysia’s mitigation efforts, we have secured fuel supply until year-end. In that sense, we have found an alternative source for the fuel supply.
“Looking ahead, we have introduced some intervention mechanisms to strengthen our resilience. For example, regarding biodiesel, we have actually increased from B10 to B15 within two months.
“The government will remain cautious and try to determine if any intervention is needed to ensure the sustainability of the supply but, at the same time, to allow economic activities to continue,” he added.
-- BERNAMA