Five 13MP pillars to watch

The Star

3 days ago

PETALING JAYA: As Malaysia aims to become a high-income, value-creating economy under the 13th Malaysia Plan (13MP), five key trends are expected to shape the country's economic trajectory from 2026 to 2030, according to Maybank Investment Bank Research (Maybank IB).
The five areas to watch, the research house said, are: a sustained investment upcycle; improvements in workers' and household incomes; fiscal consolidation and structural reforms; a push for productivity and innovation; and legislative reforms to strengthen governance.
These trends are seen as critical to achieving the 13MP's targeted gross domestic product (GDP) growth of 4.5% to 5% annually, slightly below the 5.1% average recorded under the 12MP.
The plan also underscores the importance of continued reforms and economic restructuring to drive inclusive and sustainable growth.
'Our investment upcycle thesis remains a theme under the 13MP. This is in view of the RM611bil public sector-related investment allocation, namely the RM430bil federal government's gross development expenditure, RM120bil from government-linked investment companies (GLICs) and RM61bil under private-public partnership,' the research house said in a report.
It said a key highlight of the 13MP is the reaffirmation and continuation of major infrastructure projects such as the Penang Mutiara light rail transit (LRT), Johor Baru's elevated autonomous rapid transit, and the Asean Rail Connectivity Project.
According to Maybank IB, sustaining private consumption growth will largely be dependent on raising workers' and household incomes.
However, the research house noted a lack of real wage and salary growth on a per-worker basis, limiting income gains despite rising living costs.
Monthly wage distribution remains heavily skewed toward the lower end, with more than a quarter of workers earning less than RM2,000 per month, and nearly half earning below the recently adopted living wage benchmark of RM3,100 set by government-linked companies (GLCs) and GLICs.
The 13MP outlines several labour market interventions to raise incomes and support medium-term consumer spending growth.
These include introduction of a two-tier minimum wage, scaling up the progressive wage policy, and encouraging large private companies to voluntarily adopt decent living wage practices – as already implemented by 34 GLCs and GLICs, which have set a living wage of RM3,100 per month.
Notably, the 13MP stated that a multi-tier foreign worker levy is targeted for implementation in 2026, alongside plans to reduce the 'ceiling' for foreign workers' share of the total workforce to 10% by 2030, down from 15% currently.
These measures are expected to raise employer costs, necessitating improvements in productivity and efficiency.
The 13MP sets an ambitious target of 3.6% annual labour productivity growth over the next five years – a recurring goal also seen in the 11MP and 12MP, noted the research house.
On fiscal consolidation, Maybank IB said cutting the budget deficit-to-GDP ratio to below 3% over the next five years is crucial to achieving the federal government's debt-to-GDP ratio of 60% by 2030. For 2025, the deficit consolidation is on track, with a target of RM80bil, or 3.8% of GDP.
The next main fiscal reform on the agenda is subsidy rationalisation.
'It is also worth noting that the government is incurring savings in fuel subsidies thanks to the drop in crude oil prices, as well as firmer ringgit versus US dollar,' said Maybank IB.
Beyond subsidy reforms, pension system reform is another key area to watch, given the sharp rise in government retirement spending over the past two decades.
The proposed reform is expected to offer new options for existing civil servants, particularly younger staff, and shift new hires from the current 'defined benefit' pension scheme to a 'defined contribution' model with improved contract terms.