Despite reducing dependence on commodity production by diversifying into services and manufacturing, the recent fall in oil prices has affected export earnings and weakened the currency.
The construction sector is buoyant with spending set to increase by around 8 percent in 2017. Several major projects in real estate and infrastructure have been announced including extensions to public transport in the LRT and MRT systems.
Phase one of the MYR16bn Pan Borneo highway construction packages has been finalised and a major redevelopment of Kuala Lumpur’s financial district, which includes a 92-floor office tower, a luxury hotel, shopping mall and residential towers, is set to get underway.
Work on the high-speed rail connecting Kuala Lumpur to Singapore is scheduled to start this year, and foreign investment continues to flood into the country from high-tech manufacturing firms.
The outlook is positive, but with a high exposure to foreign trade, especially with China, global uncertainties in 2017 may create headwinds for Malaysia, such as a fallout from any US-China trade barriers.
The continued slump in oil prices will damage export earnings, and business confidence is likely to remain low.