The Malaysian Institute of Economic Research (MIER) said the 2025 budget unveiled last Friday was comprehensive, but the shortage of skilled workers in the manufacturing and information technology sectors may stunt growth.
In a report on the budget, the MIER said the country was becoming more tech-driven, with sectors like electronics leading the way, with automation and the use of artificial intelligence becoming more prevalent.
However, it said Malaysia’s long-term productivity and ability to fully adopt new technologies would be hindered if the relevant industries lack skilled workers.
“Our fiscal position is strained by the need for continuous public spending on infrastructure and social programmes.
“Income inequality and inclusivity, competitiveness, environmental sustainability and the issue of skills mismatch in the labour market, among others, put a lid on our growth progress,” it said.
It added that the shortage of skilled workers has also affected the services and manufacturing sectors, which have long supported the Malaysian economy.
Last week, deputy economy minister Hanifah Hajar Taib said the rate of skills-related underemployment stood at 37% in the second quarter of this year.
Youth unemployment also stood at 10.6% for the fourth consecutive month in February, involving 306,600 people, which some attributed to a skills mismatch.
Earlier this year, investment, trade and industry minister Tengku Zafrul Aziz said the government was looking at allowing foreign graduates of local universities to work here amid a talent shortage in the tech sector.
Despite the launching of government programmes to improve skills training and encourage upskilling, MIER said more needed to be done to meet the demands of the changing job market.
The think tank called for structural reforms to address this, saying it was pertinent to cushion risks such as global economic uncertainties and geopolitical developments.
However, it did not elaborate on the kind of structural reforms that Putrajaya needed to implement.