2021 Economic Recovery An Impetus For GDP Growth To Pre Pandemic Levels

Finance Minister, Tengku Zafrul Abdul Aziz.

Despite the emergence of the Omicron variant of the COVID-19 virus and the occurrence of severe flooding in the Klang Valley and several states in December 2021, Malaysia’s Gross Domestic Product grew by 3.6% in the fourth quarter of 2021 (Q4 2021), compared to a 3.4% contraction during the same period last year.

Monthly GDP growth returned to positive territory in Q4 2021. GDP continued with a recovery momentum of 2.6% in December, following an encouraging growth of 5.4% in November, and 2.7% in October 2021. According to Finance Minister, Tengku Zafrul, the encourging figures reflects an improvement in the nation’s economic recovery momentum, which he adds will be bolstered further by the roll out of booster doses under the National COVID-19 Immunisation Programme , and the transition of the entire country to Phase 4 of the National Recovery Plan.

Overall, Malaysia’s GDP performance in 2021 showed signs of improvement, with a 3.1% increase compared to a contraction of 5.6% in 2020.

“The economy’s commendable performance in Q4 2021 was accompanied by labour market improvements as the unemployment rate fell to 4.2%, and manufacturing sales increased by 15.5% in the month of December. Throughout the quarter, external trade reached an all-time high, with the country’s total trade in 2021 exceeding the RM2 trillion mark, an increase of 24.8% on an annual basis, the fastest growth since 1994. This is attributed to a robust global economic activity, especially among our major trading partners. Moreover, our foreign direct investment (FDI) recorded a net inflow of RM24.7 billion in Q4 2021, bringing the total FDI in 2021 to more than RM50 billion (2020: RM14.6 billion), which is higher than the levels seen during the pre-pandemic years.” said Zafrul.

The banking system continues to show resiliency despite it being put through some of the most severe of tests, overall thee banking system has a healthy liquidity coverage ratio, which stood at 154% in December 2021, with gross and net impaired loan ratios remain stable at 1.4% and 0.9%, respectively.

Malaysia’s international reserves remains high at USD116.9 billion, sufficient to finance 7.7 months of retained imports and is 1.2 times total short-term external debt. Outstanding business loans increased by 4.8% in Q4 2021 (Q3 2021: 2.4%), supported by continued high growth in working capital loans. This was driven by the wholesale and retail trade, and manufacturing sectors, in line with the pickup in economic activities.

Capital market performance although in the region was one of the weaker but signs are encouraging on the back of recovery sentiments. The FBMKLCI rose 1.9% in Q4 2021, with local retail investors contributing RM12.2 billion in net buy position. The unit trust segment also saw the Net Asset Value increasing by 1.4% to RM526.9 billion as at end-December 2021. Meanwhile, foreign investors also turned into net buyers in Q4 2021 with a total of RM0.6 billion inflow being recorded during the same period.

As for the Ringgit bond market,it has exhibited continued healthy demand from foreign investors. Throughout 2021, a total of RM33.6 billion in net inflows were recorded, where 95% was subscribed to MGS and MGII. Notably, foreign holdings in Malaysian government bonds accounted for RM234 billion or 25.4% of the total outstanding long-term government bonds. The secondary market remains resilient and government primary issuances continue to be supported with average bid-to-cover ratio of 2.1 times in 2021.


The economic recovery in 2021 will provide the necessary impetus for Malaysia’s GDP to recover to pre-pandemic levels. In addition, growth will be driven primarily by an expansionary Budget 2022; normalisation in economic and social activities premised on high vaccination rates; resumption of projects with high multiplier effects; and strong external demand, especially from major trading partners. As a result, the Government is maintaining the nation’s economic growth projection for 2022 in the range of 5.5% to 6.5%. This is also in line with IMF and World Bank projections of 5.7% and 5.8%, respectively.

“The continued easing of movement restrictions, as well as more vibrant economic and social activities which are in line with strong domestic and external demand, are expected to support further economic expansion. The on-going positive business and consumer sentiments are also bolstered by high vaccination rates, where nearly 80% of the entire population is fully vaccinated. Additionally, more than half of the adult population have received their booster shots.

Moving forward, Budget 2022 initiatives like the RM4.8 billion JaminKerja that will guarantee 600,000 jobs, as well as SemarakNiaga worth RM40 billion to help businesses restart, will further support our growth momentum this year. The Government will also closely monitor any inflationary pressures, especially on food items, and ensure measures are in place to alleviate the people’s livelihood concerns.” said Tengku Zafrul.

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