OVERVIEW

The latest 5-year plan by the Economic Planning Unit (EPU) will guide the Malaysian economy through its final growth phase to the Wawasan 2020 goal of becoming a high-income nation.

Targets an average annual GDP growth rate of between 5.0% and 6.0% from 2016 to 2020, slightly lower than the earlier 10th Malaysia Plan target of 6.0% (estimate: 5.3%)

Targets gross national income (GNI) per capita of RM54,100 (US$15,690) by year 2020, which we view as possible if growth stays consistently above 5.0% per annum.

The private-sector is expected to lead growth with both private consumption and investment expanding at a faster pace than public expenditure.

Over the course of 11MP, the economy will rebalance from dependence on low-value manufacturing and exports to one based on high-value manufacturing, services and private consumption.

Achieving a balanced budget by 2020 may prove to be challenging given the ever expanding operating expenditure at the expense of gross development expenditure, suggesting a possibility of large portion of revenue redirected towards discretionary spending.

Promotes inclusive and sustainable development by aiming to improve the socioeconomic outcomes of the poorest 40% of households (B40) and enhancing access to healthcare and education.

The main challenges will come more from domestic rather than external factors and include raising the lower-income group to sustainable wage levels without excessive cash handouts (BR1M) and subsidies, aligning the skill set of the working population to the needs of the labour market and making the five year plan relevant amid a volatile and uncertain global environment.

Source: Kenanga Research - 22 May 2015