Malaysia's economy saw strong growth in 2012 but slowed down in early 2013. The growth was driven by increased domestic consumption and investment. Government policies supported higher incomes and credit growth, leading to solid consumption growth. Despite overspending, the government met its fiscal deficit target in 2012. Inflation remained low due to supply-side factors. Malaysia is expected to continue growing in 2013 and 2014, with investment growth, fiscal and monetary policies, tight labor markets, and export sector improvements playing key roles. To sustain growth, structural reforms are needed, including evaluating tax incentives to promote diversification.