The Malaysian economy made the turnaround in the second quarter of 1999 and charted further progress in 2000. The Gross Domestic Product (GDP) grew strongly of 8.5% in 2000 compared to 1999's 5.8%. The driving factors were the return of confidence, and a more stable economic environment through selective capital controls and the pegging of Ringgit. All sectors in the economy had achieved positive growth except for mining after two consecutive years of falling. The growth emanated mainly from expansion in manufacturing (21.0%) and services (4.7%) sectors. The economy was initially externally-led but later changed to broader-based as the domestic demand picked up, driven by expansionary fiscal and accommodative monetary policies.

The growth in the manufacturing sector was driven by strong demand for electronic products and sustained economic growth in USA and Asia, while the turnaround in the construction sector was because of the implementation of few large infrastructure projects and new investment in residential sector.

Domestic demand continued to grow as public and private sector's spending grew by 18.5% and 19.3% respectively. Private consumption rose 15.6% with high disposable incomes and the wealth effect amidst low interest regime. The new measures in Budget 2000 of 1% personal income tax cut, higher tax relief and 10% salary increment for public sector workers also contributed to the growth in domestic consumption.

The Consumer Price Index (CPI) showed the inflation rate dropped to 1.6% in 2000 from 2.8% previous year. While the unemployment rate decreased to 2.9% amidst a 2.1% increase in the demand of labour force and a 2.0% expansion in labour supply.

After series of quarterly figures previously, loans to the property sector started to pick up in first quarter in 2000. As a percentage of total loan, loans towards the property sector continued the trend of quarterly growths to hit 38.1% in September this year, driven by residential property which saw successive quarterly increases to reach 14.1% of total loans by the end of same period.