This article first appeared in The Edge Financial Daily on June 7, 2018

KUALA LUMPUR: Malaysia’s economy is projected to grow at 5.4% in 2018 from an estimated 5.9% in 2017, according to the World Bank.

The bank said growth is moderating after a strong rebound last year.

“However, it remains robust and exports have continued to increase in the first half of 2018,” it said.

In its Global Economic Prospects 2018 released on Tuesday, the World Bank also projected Malaysia’s economic growth to slow down to 5.1% and 4.8% in 2019 and 2020, respectively.

The World Bank said the successful diversification experience of some energy producers like Malaysia suggests the need to support both vertical diversification into oil, gas, and petrochemical sectors, as well as horizontal diversification beyond these sectors.

It said continued commitment to reforms aimed at improving governance and the business climate and reducing regulatory barriers to competition and to foreign investment has the potential to diminish reliance on the oil sector.

However, it said the diversification experience of some energy producers highlights the benefits of both vertical diversification (for examples, in the crude oil, natural gas, and petrochemical sectors) as well as horizontal diversification.

The bank added that Malaysia is among nations that have renewed fiscal consolidation efforts in 2018.

Having said that, the World Bank said Malaysia continues to face financial sector vulnerabilities, with elevated levels of debt, as well as high foreign participation in local-currency sovereign bond markets.