The World Bank said in its latest report that Malaysia's economic growth will be supported by strong domestic demand, which is underpinned by continued improvements in labor market conditions.
It also said tourism-related activities by domestic and international travelers are expected to see an uptake.
In addition, it said the continuation of multi-year investment projects will likely provide additional support for economic growth.
Nonetheless, downside risks particularly from the external front continue to prevail, including a slowdown in growth in advanced economies, unfavorable financial conditions, and continued supply chain disruptions, the report said.
On the domestic front, it said speculation over the next general elections could also raise investors' uncertainty in the near term.
It also said the growing subsidy bill is expected to exacerbate Malaysia's already tight fiscal space.
Malaysia recorded higher-than-expected economic growth of 8.9 percent in the second quarter as economic activity continued to normalize.
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