Malaysia needs to manage its natural resources sustainably and also ensure that the transformation of its economy continues apace via deep-seated reforms under the strategic reform initiatives under the Economic Transformation Programme for growth to be maintained.
World Bank economists said the country had done extremely well so far in managing natural resources and spending the revenues derived from commodities to diversify into other sectors of the economy.
However, spending in recent years has been skewed towards the oil and gas industry due to high prices. As a result, World Bank senior country economist Fredrico Gil Sander said the trend in diversification seemed to have slowed down.
Sander and country director Annette Dixon were here to present the World Bank's annual country report on Malaysia.
Sander said that without the rise in commodity prices, Malaysia would have experienced a current account deficit. He said the reliance on revenues derived from commodities had also been used on subsidies instead of more targeted measures to buffer vulnerable segments of the population while the economy underwent a transformation.
Dixon said that although subsidies were not so easily discontinued, the longer the Government took to rationalise the various subsidy schemes, especially for fuel, the harder it gets.
She said the country needs to overhaul its subsidy system and spend revenues derived from the boom in commodity prices on initiatives that would enable the economy to move up the value chain.
Dixon acknowledged that it would be more challenging now to transform the economy as commodity prices had fallen across the board due to the slower global economic growth.