The Organisation for Economic Co-operation and Development has published its Economic Survey of Malaysia, calling for renewed reforms to strengthen fiscal sustainability, productivity and education. It projects gross domestic product growth will moderate from 5.2% in 2025 to 4.9% in 2026 before reaching 5.0% in 2027, with downside risks from trade tensions, higher commodity prices and weaker global demand. Inflation is forecast to rise from 1.4% in 2025 to 2.1% in 2026 and 2.3% in 2027. Fiscal recommendations include replacing broad energy subsidies with targeted transfers, reintroducing a broad-based consumption tax, widening the personal income tax base and expanding means-tested social pensions. The survey also calls for lower market-entry barriers, fewer restrictions on cross-border digital services, a more level playing field between state-owned and private enterprises, and the replacement of price controls with targeted support. Education proposals include free compulsory preschool for three- and four-year-olds, stronger teacher incentives, greater school autonomy and accountability, and closer alignment between tertiary curricula and labor-market needs. The OECD also recommends a coherent climate adaptation strategy, better climate-risk data, wider natural-hazard insurance coverage, carbon pricing and faster renewable energy investment.
OECD2026-07-28
Organisation for Economic Co-operation and Development urges Malaysia to renew fiscal, productivity and education reforms
The Organisation for Economic Co-operation and Development projects Malaysian growth of 4.9% in 2026 and 5.0% in 2027, while warning of trade and global-demand risks. It recommends fiscal and subsidy reform, more competition-friendly regulation and education improvements. The survey also calls for stronger climate adaptation, broader natural-hazard insurance and a shift from fossil fuel subsidies to carbon pricing.