Long-Run Dynamics of Energy Consumption and Economic Growth in Malaysia

Abstract

This study investigates the long-run dynamics between energy consumption and economic growth in Malaysia from 2000 to 2021, emphasizing sectoral drivers, efficiency performance, and future projections to 2030. Using secondary data from the National Energy Balance (NEB), the study analysis correlations between Final Energy Consumption (FEC), Gross Domestic Product (GDP), and population to determine whether Malaysia’s economic growth is primarily energy-dependent or efficiency-led. The result shows a strong positive relationship between GDP and FEC (r² = 0.96), suggesting that economic expansion remains closely linked to energy use. The correlation between Final Energy Consumption and population is also significant (r² = 0.92). This indicates that both economic and demographic factors drive Malaysia’s energy demand, with economic activity has a slightly greater influence. Despite this dependency, energy intensity decreases from 52 to 41 toe per RM million (2015 prices), demonstrating measurable efficiency gains. In addition, most of the Final Energy Consumption came from industrial and transport sectors. According to projections, total FEC could reach 88 Mtoe by 2030 in a baseline scenario. The results underscore the need for targeted energy efficiency initiatives and sector-specific transition strategies that align with Malaysia’s National Energy Transition Roadmap (NETR) and its long-term decarbonization goals.