The Malaysian economy is recovering strongly from the COVID-19 disruptions in 2021 and early 2022, the ASEAN+3 Macroeconomic Research Office (AMRO) said.
Protected by its high vaccination rate, continuing nationwide inoculation program, and adequate healthcare capacity, Malaysia has progressively reopened its economy despite the resurgence of infections by the Omicron variant in early 2022, AMRO said in a report.
It said the Malaysian economic growth should firm up further with the country’s transition to the endemic phase of COVID-19 from the beginning of April.
In this respect, it said accommodative policy settings could be recalibrated to build more buffers against future shocks and safeguard financial stability.
According to the report, the Malaysian economy is on track to expand by six percent in 2022 after growth firmed up in the first quarter on the back of a strong rebound in private consumption and buoyant exports.
Meanwhile, Xinhua reported recently that Malaysia’s headline inflation is set to increase moderately to three percent in 2022 from 2.5 percent in 2021, reflecting the partial pass-through of higher global food and energy prices to consumer prices.
AMRO also highlighted that robust trade, strong foreign investment inflows, and a special drawing right allocation from the International Monetary Fund have allowed the Malaysian Central Bank to build up its reserves buffer in 2021.
The improvement in the reserves position has strengthened the bank’s capacity to withstand volatility shocks in capital flows, it added.
On the other hand, Malaysia University of Science and Technology professor and economist Dr Geoffrey Williams expressed that the 2Q22 GDP numbers should be interpreted very cautiously, as it is highly affected by the two very high GDP numbers seen in the last two quarters, 4Q21 and 1Q22.
He said the 2Q22 GDP would correspond to a growth rate of between 4.5% and 5% YoY, while projecting that quarter-on-quarter (QoQ) GDP numbers to be negative.
“We expect the negative impact from the contraction of inventories to affect the QoQ GDP figure.
“This contraction comes from the combined effect of a huge accumulation of inventories in the previous quarters and of a clear stagnation phase in the manufacturing sector,” he told The Malaysian Reserve recently.
He noted that progressively in 3Q and 4Q, the probability of a quarterly contraction of the economy is increasing because of the deterioration in the outlook of the major international economies.
He said this will result in lower growth for 2022 overall, more likely in the range of 4% to 4.5%.
“In terms of actual growth this is a high number but it reflects our more pessimistic reading of the scenario,” he added.
Bank Negara Malaysia (BNM) is set to announce the 2Q’s GDP numbers on Friday (Aug 12).
