Economists: Malaysia poised for strong recovery

Malaysia GDP Growthd

KUALA LUMPUR: Economists are optimistic that Malaysia’s economy is poised for a strong recovery in 2022.

However, they emphasised that much will depend on how the country manages its level of Covid-19 infections.

Sunway University economics professor Dr Yeah Kim Leng said there are now more palpable sentiments and greater confidence that the economic recovery will be more durable and sustainable in 2022.

“This is a natural progression of the country transitioning to Phase 4 of the National Recovery Plan, where all sectors of the economy are allowed to operate, movement restrictions lifted and gatherings allowed with prescribed public health protocols or operating procedures.

“Barring a recurrence of the nationwide movement restriction orders, which is less likely given that the population is almost fully vaccinated, the expected recovery in domestic consumption and investment activities, coupled with the ongoing export-led expansion, are expected to sustain a gross domestic product (GDP) growth of 6% in 2022,” he told StarBiz.

Besides the base effect, Yeah said the stronger domestic and external demand will contribute to positive growth.

Sunway University economics professor Dr Yeah Kim Leng said there are now more palpable sentiments and greater confidence that the economic recovery will be more durable and sustainable in 2022.Sunway University economics professor Dr Yeah Kim Leng said there are now more palpable sentiments and greater confidence that the economic recovery will be more durable and sustainable in 2022.

“However, the national income will only be slightly higher than pre-pandemic levels in 2019,” he added.

Meanwhile, Malaysia University of Science and Technology professor Geoffrey Williams said growth will be dependent on how the country handles the Covid-19 situation.

“I think the biggest risk is an overreaction to the Omicron variant and a stricter approach to enforcement, or further travel restrictions and even lockdowns.”

He noted that some countries such as the UK have begun tightening restrictions.

“This is dangerous in economic terms. The hope is that we do not see that here in Malaysia.

“Other factors such as the political environment are normal issues. But if Covid-19 restrictions affect international trade, this can hold back exports as a growth driver for Malaysia.”

Malaysia’s external trade continued its stellar performance in November 2021, with a year-on-year expansion of 34.9% to RM205.5bil, breaching the RM200bil mark for the second time in a row.

Malaysia University of Science and Technology professor Dr Geoffrey Williams.Malaysia University of Science and Technology professor Dr Geoffrey Williams.

It was also the 10th consecutive month of double-digit growth since February 2021.

According to data by the International Trade and Industry Ministry, exports rose by 32.4% to RM112.2bil, the 15th consecutive month of year-on-year expansion since September 2020.

Imports were 38% higher at RM93.3bil and trade surplus increased 10.5% to RM18.9bil.

Meanwhile, Yeah said the new Covid-19 variant, if confirmed to be less fatal, may not dent the projected GDP growth for Malaysia.

“It will certainly not derail the recovery momentum, as long as there are no widespread lockdowns and movement restrictions.

“The general election may spur campaign-related spending and boost the local economy but it may put on hold investment activities of investors who are averse to political uncertainties.”

Yeah said the Malaysian stock market will likely respond quickly as investors remain wary of new Covid-19 waves, as in the case of the Omicron variant when it was first detected.

“While rising infections are prompting authorities to consider tighter measures in the United States and Europe, the rollout of booster shots and increase in hospitalisation capacity suggests that the world is better prepared to face new variants and higher community immunity.

“Hopefully, there will no longer be restrictive measures such as those that were imposed during previous waves that shocked the economy,” he said.

Separately, Hong Leong Investment Bank (HLIB) Research said in a report that the Malaysian economy is expected to grow beyond 5.5% in 2022.

“This sits at the lower end of the Finance Ministry’s official target of between 5.5% and 6.5%, reflecting fluidity of the virus’ evolution to the economy.

“With the need to drive economic recovery, we feel the more gradual pace of projected fiscal consolidation is realistic.”

Bank Negara is expected to begin its upward normalisation in the overnight policy rate from the fourth quarter of 2022, according to HLIB Research.

“We expect a 25-basis-point hike to 2%, given our view that economic conditions would be more entrenched by then while GDP would have also recovered to pre-pandemic levels.

“Furthermore, we project inflation to be more modest in 2022 with the consumer price index forecast at 2%, versus 2021’s 2.4%, on expectations of government intervention to limit the rise in cost of living,” it said.

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