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 owing to 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 recession in 2009 and a strong rebound in 2010. Real GDP growth will average 5.4% 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 faster pace of growth in merchandise imports than in exports, Malaysia will continue to post substantial trade and current-account surpluses in the forecast period.

Monthly review

• The BN coalition retained control of the Sarawak assembly following a state election there on April 16th. The BN kept its two-thirds majority, albeit by a reduced margin-it lost eight seats to opposition parties.
• The results of the Sarawak poll showed a drop in the BN's share of the vote compared with the 2006 state election and a failure to strengthen its appeal among ethnic Chinese, who make up 29% of the state's population.
• In a bid to bolster its profitability, a local financial services provider, CIMB Bank, raised its base lending rate recently, but then quickly changed its mind following intervention by Bank Negara Malaysia (the central bank).
• The prime minister, Najib Razak, has once again used an Invest Malaysia conference, organised by the local stock exchange, Bursa Malaysia, to reveal initiatives, unveiling details of a second master plan for capital markets.
• Consumer price inflation edged higher in February. The consumer price index was up by 2.9% year on year in that month, following an increase of 2.4% in January.
• The latest sentiment survey points to an improvement in business confidence in the first quarter of this year, but consumer confidence has deteriorated.