Malaysia climbs up 2025 World Competitiveness Ranking list

Malaysia has climbed 11 positions in the 2025 World Competitiveness Ranking (WCR) list, securing 23rd spot out of 69 economies – its highest placement since 2020.

The WCR, released each year by the Institute for Management Development in Switzerland, evaluates countries based on their ability to foster a supportive business environment and drive sustainable economic growth.

Malaysia’s advancement from 34th place last year highlights the country’s robust economic recovery and ongoing reform initiatives, according to the Ministry of Investment, Trade and Industry (Miti).

This progress supports Malaysia’s goal of joining the world’s top 12 most competitive economies by 2033, as set out in the Madani Economic Framework. The framework encourages innovation and inclusivity to strengthen Malaysia’s economy particularly in technology and productivity.

“This achievement is a clear indication that the Madani government’s reform efforts are bearing fruit,“ Prime Minister Anwar Ibrahim said in response to the WCR report.

According to the WCR, Malaysia’s enhanced global competitiveness is driven by strong economic performance, improved government efficiency, and more effective business operations.

The country now ranks fourth globally in economic performance – up four places from last year – while government and business efficiency factors each improved by eight positions.

International trade has also seen significant progress, climbing 11 places to rank sixth, due to robust export growth, diversified markets and increased tourism receipts, which together have strengthened Malaysia’s trade surplus.

At the strategic level, the National Competitiveness Committee, co-chaired by finance minister II Amir Hamzah Azizan, co-ordinates efforts across ministries to boost competitiveness.

At the same time, the Special Taskforce on Agency Reform ensures the effective implementation of more than 1,000 projects under the Public Service Reform Agenda.

Further, Miti emphasises that these bureaucracy-related reforms are closely linked to facilitating strong investment and industrial growth, both of which are essential for making Malaysia a more attractive investment destination.

With an ongoing commitment from federal and state governments and close collaboration with the private sector, Malaysia is well-positioned to achieve its goal of becoming one of the world’s 12 most competitive economies by 2033, Miti said.

New tax ‘may cause consumer price rises’

The upcoming expansion of the sales and services tax (SST), set to take effect on July 1, is unlikely to derail Malaysia’s economic growth, although it may trigger a short-term spike in consumer prices, analysts say.

Supportive domestic policies and targeted implementation are expected to cushion the broader impact of the expanded SST.

According to CGS International Research (CGSI Research), while the broader SST coverage is set to affect luxury goods and non-essential services –particularly those consumed by foreigners – it is designed to avoid burdening the average household.

“Based on our estimation, we deduced that the SST expansion could add 10 to 20 basis points (bps) to Malaysia’s annual consumer price index (CPI) this year,” the research house said in a note.

“In terms of trajectory, we expect a short-term spike in prices where the CPI could rise by 0.5% month-on-month in July and 2.2% year-on-year compared with 1.8% year-on-year in June, before peaking in September at around 2.4% year-on-year,” the research company said.

Nevertheless, CGSI Research maintained its full-year CPI forecast at 2% year-on-year, citing weaker global commodity prices as a mitigating factor.

The expansion of the tax, dubbed SST 3.0, follows the earlier SST 2.0 revision last year, which had minimal effect on economic growth.

This time, the government has widened the tax base to cover more luxury items and services equivalent to 12.9% of gross domestic product (GDP), while increasing sales tax rates on 64% of listed products.

“We think the negative impact of SST 3.0 on GDP growth this year should be modest due to support from wage reform and cash assistance,” CGSI Research highlighted.

“The expansion of the SST has been specifically curated to target high-income earners so that private consumption is unlikely to be negatively affected,” it pointed out.