Malaysia's financial fundamentals draw IMF praise
These factors, including Malaysia's strong balance sheet, position the country well to navigate global financial volatility without major disruption, the IMF stated in its 2025 External Sector Report, released in Washington on Monday.
The IMF said that Malaysia's net international investment position (NIIP) is expected to increase over the medium term, supported by projected current account surpluses.
"Malaysia's NIIP has averaged about 2.6 per cent of gross domestic product (GDP) over the last decade, increasing to 5.4 per cent at the end of 2023, supported by strong current account surpluses during the pandemic that helped increase reserve assets," said IMF.
It highlighted that the NIIP then declined to -0.6 per cent of GDP at the end of last year because of an increase in direct and portfolio investment liabilities. At the same time, total external debt increased to 69.7 per cent of GDP at the end of 2024, compared to 68 per cent at the end of 2023, and remains manageable.
One-third of the external debt is denominated in ringgit, which means it is not subject to valuation risks, the IMF noted. Additionally, short-term external debt, making up 42.8 per cent of the total external debt, is considered manageable.
The IMF said this is primarily because most of it consists of intragroup borrowing among banks and corporations — an arrangement that tends to be stable — or trade credits that are backed by export earnings.
It emphasised that Malaysia's external position in 2024 was assessed to be moderately stronger than the level implied by medium-term fundamentals and desirable policies.
After falling in 2023 amid a challenging external environment, the country's current account surplus fell slightly in 2024, as higher intermediate and capital goods imports outweighed higher exports due to an upturn in the global semiconductor cycle, it added.
"Over the medium term, the current account surplus is projected to increase slightly as the services balance benefits from a continuing recovery in tourism," the IMF said.
The global organisation also outlines potential policy responses by Malaysia, which, among others, in the near term, preserve exchange rate flexibility to facilitate external adjustments that are driven by fundamentals.
Over the medium term, IMF said policies to strengthen social safety nets and public health care could be implemented, including through a reorientation of fiscal spending, to reduce precautionary household savings and shift toward private consumption.
This year's report by IMF provides the external sector assessment of 30 of the world's largest economies on the basis of their 2024 data.
This assessment constitutes a key part of the IMF's mandate to encourage the balanced expansion of trade and economic growth and promote international monetary cooperation.
The individual economy assessments use a wide range of methods to form an integrated and multilaterally consistent view of economies' external sector position
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