Malaysia On Track To Become High-Income Nation: World Bank
Jul 08, 2019

Malaysia remains on course to become a high-income nation by 2024, the World Bank has reaffirmed its confidence in Southeast Asia’s fourth-largest economy. The organisation said that Malaysia’s aspiration remains possible as long as the country’s gross national income (GNI) per capita continues to grow at a range of between four and 4.5 per cent annually.

In case of growth at the higher end, Malaysia could exceed the high-income threshold as early as 2021, the World Bank’s lead economist for Malaysia, Richard Record, said, adding that the status also depends on exchange rate dynamics, among other factors.

As of 2018, Malaysia’s annual GNI per capita stood at $10,460, which was $1,915 below the threshold level of $12,375 that the World Bank currently sets to define high-income country status.

“In the numerical sense, Malaysia will certainly pass the threshold, Record said.

“But average income tells you nothing about the distribution of income. Of course, there are many other ways of measuring development progress, in terms of health, education, quality of public services and others,” he told media at the launch of the 20th edition of the World Bank’s Malaysia Economic Monitor on July 2 in Putrajaya.

In the report, the World Bank lowered Malaysia’s growth forecast for 2019 slightly to 4.6 per cent from 4.7 per cent previously. As for 2020 and 2021, the World Bank expects Malaysia’s economic growth to remain steady at 4.6 per cent.

The downward revision for 2019 was largely due to the weaker-than-expected investment and export activity in the first quarter of this year.

In order to ensure economic resilience in the near term, the World Bank has recommended the government to focus on rebuilding fiscal buffers, facilitate private investment and ensure adequate social protection for lower-income households. The development bank also said that the government should undertake bold reforms and measures to increase revenue.

Record pointed out that Malaysia trails many upper-middle and high-income countries in the collection of personal income tax revenue and proceeds from taxes on goods and services. The country’s top marginal income tax rate currently stands at 25 to 28 per cent, which is relatively low compared to many regional nations and most high-income countries.

“We are not advocating that Malaysia should quadruple its personal income tax revenue, but over time, if Malaysia seeks to provide an increased range and quality of public services and aspires to become a high-income economy, then Malaysia will need to collect more personal income taxes,” Record said.