The Country’s Economy Returns Strongly In The First Quarter Of 2022

Gross domestic product (GDP) growth for the first quarter of 2022 recorded a growth of 5.0%, which was much better than the expectations of most economic analysts.

Among the indicators that recorded better performance include:

i. Foreign direct investment (FDI) recorded a higher net inflow, which almost tripled to RM24.4 billion from RM8.5 billion in the first quarter of 2021 and about half of RM48.1 billion for the whole of 2021;
ii. The labor market is recovering with the unemployment rate declining to 4.1% in the first quarter of 2022 with the number of unemployed declining to 671.2 thousand people, the lowest level since the second quarter of 2020;
iii. The Consumer Sentiment Index published by the Malaysia Institute of Economic Research (MIER) surpassed the optimistic threshold of 108.9 points in the first quarter of 2022 compared to 97.2 points in the fourth quarter of 2021; and
iv. The Chief Executive Confidence Index co-published by Vistage and MIER recorded 122.1 points in the first quarter of the year
2022, which is the highest since the COVID-19 pandemic.

Economic performance is expected to remain strong in the second quarter of 2022 driven by the Government’s move to reopen the country’s borders and the transition to the endemic phase beginning April 1, 2022.

The reopening of the border is expected to revive the tourism sector affected by the COVID-19 pandemic since March 2020, particularly to related industries including aviation, accommodation, and hospitality. The government expects two million foreign tourists to arrive this year and contribute RM8.6 billion to the country’s economy.

However, as an open economy, the country’s economy faces challenging external environmental risks, including:

i. Lower world economic growth expectations for 2022 as projected by the International Monetary Fund, IMF (IMF: 3.6% versus January 2022 projection of 4.4%) and the World Bank (3.2% versus January 2022 projection of 4.1%);

ii. The Russia-Ukraine conflict that has lasted for about 3 months has led to disruptions in the global supply chain as well as rising crude oil and commodity prices that will put pressure on rising inflation;

iii. Measures taken by China to tighten movement restrictions to curb COVID-19 which will affect the country’s export demand as China

is Malaysia’s main trading partner; and

iv. Uncertainty of monetary policy of some developed countries that will affect the flow of capital markets.

In this regard, the Government will continue to strengthen the following efforts:
i. Accelerate the reform and transformation of economic structures;
ii. Strengthen the Government’s fiscal position;
iii. Encourage domestic private investment;
iv. Strengthen the delivery of Government services especially in reducing bureaucracy and facilitating business;
v. Intensify activities to improve the country’s food security; and
vi. Ensure price stability and curb rising prices of goods.

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