The Organisation for Economic Co-operation and Development (OECD) has called on Malaysia to take additional steps to boost its economic competitiveness and improve its ability to withstand external shocks.
During a virtual conference on the OECD Economic Outlook held on Wednesday, Jens Arnold, the organisation’s head of division for Southeast Asia, underscored the need for further reforms to help Malaysia navigate ongoing global uncertainties.
Recent media reports reveal that the United States has put forward a proposed “revenge tax,” a retaliatory measure intended to address what it considers to be unfair tax practices by other countries.
The proposal would impact passive income derived from US investments, as well as profits earned by companies operating within the US. It primarily targets foreign-owned entities, including governments, corporations, and private foundations, and could have significant implications for a wide range of international stakeholders.
Arnold suggested that Malaysia could enhance its economic prospects by further easing the remaining restrictions on foreign direct investment (FDI) and promoting fairer competition among state-owned enterprises, government-linked companies, and private sector players, The Edge Malaysia reports.
“Malaysia has some scope for support on the monetary side. Inflation is low and has been very well contained, but beyond that, it is even more important to consider structural policies that can enhance the economy’s competitiveness going forward,” he said.
He also highlighted the need to tackle labour market challenges, especially skills mismatches, by boosting investment in education to better prepare the workforce for future economic disruptions.
“These are critical steps to make the economy more resilient and capable of withstanding shocks on the horizon,” he went on to add.
Meanwhile, OECD chief economist Alvaro Pereira stated that Malaysia’s economy is expected to grow by 3.8% in 2025, largely due to anticipated weaker export performance.
He said that while the country saw robust export growth in 2024, ongoing global uncertainties could dampen trade in the coming year.
Pereira also noted that Malaysia’s inflation stood at 1.8% in 2024 and is projected to increase gradually, reaching 2.2% in 2025 and rising further to 2.7% in 2026.
“Currently, Malaysia's labour market is remarkably strong and is expected to support private consumption going forward. Unemployment is at a 10-year low, while labour force participation continues to rise steadily,” he stated.
He added that the current monetary policy stance is broadly neutral and appropriately expected to remain unchanged, although there is some flexibility for easing if economic growth slows.
However, he warned that monetary authorities should stay alert to potential inflationary pressures, particularly those arising from a tight labour market, along with increases in the minimum wage and civil service salaries.