MALAYSIA: In a significant announcement today, the World Bank has projected that Malaysia is poised to achieve high-income nation status by 2028.
This optimistic forecast, as reported by the Malay Mail, comes with the possibility that the Southeast Asian country could reach this milestone even earlier, potentially by 2027, if the current favourable exchange rate of the Malaysian ringgit against the US dollar continues.
High-income status within reach
Apurva Sanghi, the World Bank’s lead economist for Malaysia, emphasized that the country’s economic trajectory, coupled with the ringgit’s performance, indicates that high-income status is well within reach.
Based on projections, Malaysia is expected to achieve this status by 2028, assuming an exchange rate of 4.54 Malaysian ringgit to the US dollar and an average growth rate of 4.3 per cent.
However, if the exchange rate remains around 4.20, the goal could be realized a year sooner, in 2027.
Despite the positive outlook, Sanghi cautioned that achieving high-income status does not automatically translate to high development and highlighted the potential risk of reversal.
He pointed out that the ringgit’s recent strength is attributed to improved investor sentiment, driven by a loosening of US monetary policy, robust domestic economic data in the second quarter, and significant government reforms.
These factors have bolstered investor confidence and increased demand for the ringgit.
The World Bank also credited the government’s targeted initiatives and Bank Negara Malaysia’s efforts to repatriate funds and enhance the currency market’s functioning to further support the ringgit.
Additionally, the Bank revised its 2024 growth forecast for Malaysia to 4.9 per cent, citing stronger-than-expected household consumption and improved investment and trade performance in the first half of the year.
Malaysia’s GDP per capita is approximately 12 per cent above pre-Covid levels, outperforming many of its ASEAN peers. This upward trend positions Malaysia as a beacon of economic resilience and growth in the region.
As the country continues to navigate its path to high-income status, the World Bank’s predictions underscore the potential for Malaysia to make significant strides in the coming years.