Malaysia’s export-focused economy is supported by agriculture, mining and manufacturing sectors. The external flow of goods and services from this Southeast Asian country account for around 70% of its economic output. Tourism also is a major economic driver; it’s expected to growing an average of 5% a year through 2020, according to Oxford Economics.
Economic growth slowed to 5% in 2015, down from 6% the year before. Malaysia’s economy now is growing at its slowest pace since 2009; sluggish investment in both the public and private sectors makes matters worse.
Malaysia’s currency will support stronger exports this year. But rising prices and lackluster job growth suggest consumer spending may lose momentum. Oxford Economics forecasts economic growth of 4.3% in 2016 and growth below 5% in the years ahead.
Business travel industry insight
Most of the 36 million international visitors to Malaysia in 2015 came as tourists, but 12% of them came to conduct business. Business travel spending added up to more than $22 billion in 2015, ranking Malaysia as the fourth-largest business travel market in Asia—on par with India and Singapore. Inbound travelers account for two-thirds of spending on business travel, but spending on domestic business trips is growing rapidly.
Hotels are enjoying stronger demand in 2016—largely because weakness in the nation’s currency, the ringgit, makes Malaysia a more affordable destination. Malaysia also has drawn more Chinese travelers since easing visa requirements. Kuala Lumpur offers a good selection of international hotels. Choices are more limited in Kota Kinabalu and Penang.
For most short-haul flights, passengers can choose between Malaysia Airlines and low-cost carrier AirAsia. Full-service, low-cost Malindo Air has entered the market as a third option. It’s backed by Indonesia’s Lion Air, is expanding rapidly and already has plans to compete on long-haul routes.
- Consumer confidence and an increase in the minimum wage are encouraging domestic spending that supports economic growth.
- Malaysian goods more competitive in global markets because of depreciation of the ringgit.
- The government plans to increase spending on infrastructure, which will spur business news companies participating in these projects.
Slow job growth and rising prices linked to the currency deprecation could weigh on consumers, whose spending has provided significant economic support in recent months.
- Scandal surrounding a Malaysian state fund, 1Malaysia Development Bhd (1MDB), has worried foreign investors and reduced the flow of capital into the country.
- A rise in U.S. interest rates would put extra pressure on the Malaysian currency.