The World Bank has downgraded Malaysia's economic growth this year to 4.6 percent from 4.7 percent due to weaker than expected investment and export activity, according to its economic report today.
The World Bank said the adjusted growth forecast was due to Malaysia's deep financial and trade integration with the global economy, unresolved trade tensions, heightened protectionist tendencies among major economies, a sharper than expected slowdown in larger economies, as well as the volatility in financial and commodity markets posing risks to growth in the near term.
While private consumption is expected to continue to support domestic demand, its growth is projected to decelerate to 6.6 percent this year.
Exports are also projected to grow at a more moderate pace of 0.7 percent in 2019.
"Malaysia's growth outlook continues to face downside risks with a potential escalation of trade tensions and a more subdued business environment.
"The country's comparatively high levels of public debt will continue to constrain the amount of fiscal space," said Mara Warwick, the bank's country director for Brunei, Malaysia, Philippines and Thailand.
With an uncertain external environment and subdued business confidence, she opined that Malaysia's policy actions should aim to strengthen fiscal buffers, facilitate private investment and ensure adequate social protection for lower-income households.
In the medium term, bold reforms and measures are needed, particularly to boost human capital and increase the level of public sector revenues, she added.
The World Bank also expects the Malaysian economy to grow at a similar pace in 2020.
Malaysia's economy expanded at a more modest pace of 4.5 percent in the first quarter of this year and grew 4.7 percent in 2018.