KUALA LUMPUR: Malaysia's economy remains resilient, with the gross domestic product (GDP) projected to grow 4.4% in 2016 and 4.5% in 2017, said the World Bank.
The outlook reflects a gradual deceleration in private consumption in Malaysia due to softening of the labour market and continued adjustments to fiscal consolidation.
Private investment is also expected to slow as commodity prices and global economic growth remain subdued, according to the World Bank's Malaysia Economic Monitor, launched in Kuala Lumpur on Thursday.
The report noted that key risks facing Malaysia's economy stem from commodity price instability and uncertainty over the growth trajectory in the global economy and its impact on Malaysia's export.
The Malaysia Economic Monitor includes a special focus on the strategic relevance of trade agreements that can help Malaysia implement key economic reforms needed to accelerate the country's transition to high-income status.
The World Bank said Malaysia is now engaging in a new generation of regional agreements, including the Regional Cooperation Economic Partnership (RCEP), the Trans-Pacific Partnership (TPP) and the European Union Free Trade Agreement (EUFTA).
"These agreements can help attract investments, spur innovation and technological upgrading, and further open up market access for Malaysia's exports of goods and services.
"They can also bring benefits through reforms in new areas that were not included in past agreements, such as competition policy, government procurement, investment-state disputes and investment policies," it added.
The report also said the new trade agreements can advance Malaysia's reform agenda in four key areas, namely services, investment, competition and small and medium enterprises.
On the services sector, it said Malaysia still trails many countries in East Asia in terms of contribution to the GDP and exports.
An efficient services market can enhance Malaysia's competitiveness.
As for the small and medium enterprises, this sector represents 97.3% of firms and accounted for 35.9% of GDP in 2015, but accounts for only 17.8% of exports.
"They are substantially less productive than large firms and it will be critical to address the constraints SMEs face, to raise productivity and reap the benefits of emerging trade opportunities," the World Bank said.
Meanwhile, International Trade and Industry Minister Datuk Seri Mustapa Mohamed said in a statement that the new generation of trade agreements can provide the needed impetus to boost Malaysia's economy to greater heights.
"The 11th Malaysia Plan emphasises competitiveness and productivity as important ingredients to raise the standard of living of Malaysians.
"These trade agreements can open up market access for goods and services, facilitate new types of foreign direct investment, encourage more competition, provide greater access to skills and technology, and create more and better jobs for Malaysian workers," he said. - Bernama
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