Economic growth and sustainability

Malaysia is an emerging country in the middle-income group. Its rising population is a major element in supporting future economic expansion. However, the country faces two deeper issues. First, the fertility rate, meaning the average number of children a woman can expect to have, has declined steadily as Malaysia’s economy has advanced. It is now below the critical point at which a population replaces itself. Second, Malaysia has an ageing population, with a growing share of people aged over 65 years. In 2015 the average age of Malaysia’s population was 28.2 years; by 2030 it is predicted to rise to 34.1 years. Malaysia’s predicted total population to 2027 and its ageing population from 2017 to 2022 are illustrated in Figs. 1.1 and 1.2 below. The main question for Malaysia’s government is whether it is ready for this major population change. There is still considerable reason for optimism. The economy seems to have bounced back from the impact of the COVID-19 pandemic. Its growth rate in 2021 and the 2022 forecast was above the government’s target of 5.1%, helped by strong growth in exports of electrical and electronic goods, palm oil, gas and oil supplies. Unemployment is under 4% and the current account of the balance of payments was expected to show a record surplus in 2022. Economists, nevertheless, worry that Malaysia’s government and its people may not be prepared for the difficulties created by an ageing population. In a recent survey, 70% of respondents said it was the responsibility of the young to care for the elderly, but they also feared that the economy might be unable to handle the strain on its human capital and other resources. More resources will need to be directed towards meeting the needs of older people. It was also argued that Malaysia needed a clear plan to manage this situation. One economist said that free childcare for working parents was vital and that tax incentives ought to be used to keep more elderly workers in employment. Source: Saw Yee Fung, Low rates impact on Malaysia’s human capital and economic development, The Star (KL) 15 October 2022.

Oct/Nov 2025

Which government policy is least likely to encourage inclusive economic growth?

Oct/Nov 2025