Strong growth and resilience to shocks have helped Malaysia achieve sizeable improvements in material living standards. Further progress will now hinge on new policy approaches to boost productivity and provide better opportunities for wider parts of the population, including through reforms in the education system. Fiscal consolidation should be stepped up to reduce Malaysia’s vulnerability to economic shocks and anticipate rising spending pressures from social protection, education and investment. This will require reducing fossil fuel subsidies and re-introducing a broad value-added tax while protecting low-income households with targeted transfers. The effects of climate change are becoming increasingly visible, calling for more coordinated adaptation efforts and further emission reductions. Boosting productivity will require stronger human-capital investment and regulations that are simpler and more conducive to dynamic firm entry and growth. Deteriorating education outcomes and skill mismatches require fundamental reforms of the education system, including more and better spending on pre-school, primary and secondary education, stronger incentives and more autonomy and accountability for educational institutions.
SPECIAL FEATURES: BOOSTING PRODUCTIVITY; COPING WITH CLIMATE CHANGE; IMPROVING SKILLS, EDUCATION AND TRAINING
