Outlook for 2011-15

• Political stability in Malaysia will come under moderate threat during the next five years, not because of any major shift in the balance of power, but rather because of internal strife within the two main political alliances.
• The Economist Intelligence Unit expects the governing Barisan Nasional (BN) coalition to call an early election-most likely in 2012, a year before its current term ends.
• Fiscal policy will be tightened gradually during the forecast period as the government strives to balance its budget by 2020. Monetary policy will also become tighter as domestic demand strengthens.
• The economy is expected to resume a fairly stable growth path in 2011-15, following a mild domestic recession in 2009 and a strong rebound in 2010. Real GDP growth will average 5.3% a year in the forecast period.
• The rate of inflation will accelerate to 3.2% in 2011 and will then average 3.6% a year in 2012-15. The government plans to rationalise the country's extensive subsidy schemes, and this will push up consumer prices.
• Despite the relatively rapid pace of growth in merchandise imports compared with that in exports, Malaysia will continue to run substantial trade and current-account surpluses in the forecast period.

Monthly review

• Following weeks of speculation the chief minister of Sarawak state, Taib Mahmud, announced the dissolution of the state assembly in March, paving the way for state elections that are likely to be held in the next month or so.
• Members of the BN secured convincing victories at two state by-elections in March. The coalition has won four by-election contests simultaneously since November 2010.
• In March Bank Negara Malaysia (the central bank) announced its intention to raise the statutory reserve requirement ratio from 1% to 2%, with effect from April 1st.
• The construction of a rare-earth metals processing plant in Pahang state attracted much attention in Malaysia and abroad in March. The facility will be operated by an Australian mining company, Lynas.
• The latest balance-of-payments figures published by the official data office, the Department of Statistics, show a slight deterioration in the current-account position in 2010 compared with 2009.
• Monthly trade data from the government showed both merchandise exports and industrial output growing at a sluggish pace in January.