Socio-economic impacts of the energy transition: Malaysia

Malaysia has sustained strong economic growth in recent decades, with average annual gross domestic product (GDP) growth exceeding 4%. The country’s performance has been underpinned by robust policies and targeted structural reforms, and its growth prospects are good, supported by rising domestic demand, the emergence of high-tech industries and the post-pandemic recovery of global markets.

Increasing challenges from climate change are likely to impede economic development, exacerbate social inequalities and strain environmental sustainability. Low-income households are among the most adversely affected by such events. They are often more exposed and located closer to extreme weather conditions, have limited access to public services and lower resources to cope with the consequences. Tackling these challenges calls for a comprehensive set of mitigation and adaptation measures that will strengthen community resilience and enhance risk-sharing mechanisms.

Holistic policies to drive the energy transition offer a viable pathway for Malaysia to achieve its economic, environmental and social objectives. Targeted energy policies could improve socio-economic outcomes in Malaysia, especially in the social and distributional dimensions. Integrating social investments into climate strategies would yield larger welfare gains for Malaysia in the future. Ensuring an inclusive approach is important so that benefits are shared equitably distribution across regions and social groups. Given persistent structural inequality and gaps in social protection, Malaysia is well-placed to benefit from the opportunities created by the energy transition, along with the support of the international community, and to promote more equitable and resilient development.