Malaysia is South East Asia 's 4th economic powerhouse and continues to perform well, owing to the high global demand for electronics, rising demands for commodities such as oil and gas, a strengthened labor market, a pro-cyclical budget, and comprehensive spending on infrastructure. The declining government spending and lower public and private investment, however, lowered growth in the economy to an estimated 4.3 percent in 2019. As a result of the COVID-19 outbreak, GDP growth is projected to fall to -1.7 percent in 2020 and to pick up to 9 percent in 2021, subject to the post-pandemic global economic recovery, according to the latest IMF projections of 14 April 2020.

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A political crisis, low oil, and commodity export prices and China's slowdown have profoundly affected Malaysia’s economy over the last few years, putting pressure on the country’s economy. Malaysia has the highest level of debt in the region (56.3% of GDP in 2019, IMF), with spending increasing more rapidly than GDP. 

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Nevertheless, with the increase in oil prices and previous government spending-reduction initiatives, the fiscal deficit has been reduced to 2.6 percent in 2019 by cutting subsidies and is expected to remain stable in the near future (IMF).

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The government has initiated a fiscal reform plan aimed at achieving a balanced budget by 2020, including rationalizing subsidies and is also working to strengthen the 6% GST scheme, implemented in 2015, with new computer systems that will reduce leakage in GST output. The 2019 budget continued the transformation plans of the Government to create new opportunities for wealth generation by ensuring that the country is ready for the digital economy. 

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Budget initiatives include a more balanced population economy: increased cash support for low-income households, additional funding for affordable housing projects, more incentives for entrepreneurship to boost lower-income classes, and increased competitiveness in Malaysia. The government is facing numerous challenges, including the weakening of the Malaysian currency, the decline in oil prices (because oil revenues account for 30 percent of government revenues), and the collapse in commodity export prices. Inflation stayed at 0.7 percent in 2019 and is projected to fall to 0.1 percent in 2020 and grow to 2.8 percent in 2021 (World Economic Outlook IMF, April 2020).

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Malaysia is well on track to reach high-income status by 2024. The country has one of Southeast Asia 's highest living standards and a relatively low unemployment rate (3.3% in 2019, IMF data), however, the youth unemployment rate is more than triple (11.6%, World Bank 2019), and rural youth are not statistically counted. 

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The New Economic Model launched by former Prime Minister Najib, however, aims to further boost the Malaysian economy, by doubling per capita income by 2020. The 11th Malaysia Plan identifies a path to advanced economic status and greater inclusion through a wide range of policy issues such as equity, inclusiveness, environmental sustainability, development of human capital, and infrastructure. Less than 1 percent of households in Malaysia live in extreme poverty. However, the IMF expects the unemployment trend to be affected by the COVID-19 pandemic's negative economic impact, with the rate currently estimated to rise to 4.9 percent in 2020 and fall to 3.4 percent in 2021.