Financing sustained economic growth: future developments in the Malaysian capital market

Abstract

Mobilising financial resources has always been a central part of economic growth and economic development. Economic growth is, normally, accompanied by financial evolution which moves from self reliance towards formal credit relationship. Financial deepening is an important aspect of growth and an integral part of financial deepening is the growth of the capital market. It would seem that there is a close positive correlation between growth and financial deepening. As Malaysia progresses towards attaining the status of a developed country, it has established a set of macroeconomic targets that it would like to achieve by the year 2020. This is a scenario of annual GDP growth rate of 7% from 1991 to 2020, GNP per capita in nominal terms of RM80,000 by 2020 from RM6,180 in 1990, full employment and minimum inflation. By no means this is an easy feat. Nevertheless, the progress, so far, has been commendable: GDP growth for 1994 is expected to be 8.5%; GNP per capita is estimated to be RM8,856; inflation rate is estimated to hover at around 3.8%; and the country is already operating at full employment.