The Malaysia’s economy still stands on a solid foundation supported by a strong robust economic base guided by pragmatic policies and structural diversity. The government also envisaged that the management of the national economy in 2022 was expected to be more challenging, and remained cautious in implementing various measure to mitigate the challenges against the nation and its people.
A statement released by the Economic Planning Unit today cited that the COVID-19 pandemic hit the country in early 2020 causing a unprecedented health and economic crisis. The National GDP for 2020 contracted by 5.5% — the largest contraction since The Asian Financial Crisis in 1998.
The government introduced a total of eight economic stimulus packages worth RM530 billion in 2020 and 2021 to ensure business continuity and to ease the burden of Malaysians severely affected by the COVID-19 pandemic.
Steps taken by the government in implementing the package stimulus and the gradual reopening of the economy has reduced the major impact of this crisis and also supports the nation’s economic recovery towards growth.
The result seen was that Malaysia’s economy grew by 3.1% in 2021.
The success of the national COVID-19 immunization program (PICK) allowed cross-state mobility from Oct 11, 2021. In parallel, the national economy continued to strengthen in 2022 where the nation’s GDP for the second quarter of 2022 recorded growth of 8.9%, higher than the 5.0% recorded in the first quarter of the year.
In the second quarter of 2022, Malaysia’s economic growth was recorded as the highest in the ASEAN region as well as being higher than some developed nations: The economic growth recorded in comparison were as follows:
• China: 0.4%;
• United States: 1.6%;
• Korea: 2.9%;
• EU: 4.0%;
• Singapore: 4.4%;
• Indonesia: 5.4%;
• Philippines: 7.4%.
The national economy growth rate is expected to reach the target of between 5.3% to 6.3%. This takes into account the achievements of the first half of 2022 of 6.9%.
Other sectors also saw better performance for the period; the key indicators were as follows:
– The Purchasing Managers’ Index (PMI) continued to exceed the value level threshold of 50.3% in August 2022 comapre to the previous month;
– The total sales of passenger and commercial vehicles increased by 271.7% to 66,614 units in August (Jan-August 2022:62.8%);
– The Industrial Production Index (IPI) surged by 12.5% in July 2022 (Jan-July 2022: 6.6%);
– The sales value of the manufacturing sector in July 2022 increased by 23.8% or RM148.4 billion, the highest since May 2021 (Jan-July 2022:RM1,007.2 billion);
– Wholesale and retail trade sales increased by 41% or RM130.7 billion in July 2022 (Jan-July 2022: RM882.2 billion); and
– The number of tourist arrivals increased to 3.2 million tourists for Jan-June 2022.
The general rise in price levels is a global phenomenon. Malaysia’s inflation rate increased by 2.8% for the period January-July 2022, in line with Bank Negara Malaysia’s target, which was between 2.2% – 3.2% for the year 2022.
For the month of July 2022, Malaysia recorded an inflation rate of 4.4%, which was comparatively lower compared to several countries namely:
• United Kingdom (10.1%);
• Euro Zone (8.9%);
• United States (8.5%);
• Thailand (7.6%);
• Singapore (7.0%);
• Philippines (6.4%);
• Republic of Korea (6.3%); and
• Indonesia (4.9%).
The lower rate of price increases in Malaysia is the result of various measures and initiatives implemented by the government, like maintain subsidies, set ceiling prices for certain goods, increase enforcement and stringent monitoring at the borders and establishing the Special Jihad Team to Fight Inflation (Pasukan Khas Jihad Tangani Inflasi).
The unemployment rate in Malaysia declined to 3.7%, which is close to the pre-pandemic level. This was a marked improvement compared to the rate being at 4.6% recorded in 2021 and 5.3% in May 2020.
The unemployment rate is expected to continue to decrease gradually over the coming months.
Foreign Currency Exchange Rates
In general, the currency of most countries depreciated against the United States Dollar (USD) due to the subsequent strengthening of the maturity value of the USD, and an aggressive policy interest rate increase by the nations’s Federal Reserve.
Since January 3, 2022, the value of the USD when compared to other world currencies rose by about 14%. Comparatively, from 3 January 2022 until 20 September 2022, the value of the ringgit has depreciated by 9.2%. however, Malaysia is not the only country facing currency depreciation. Some currency values for countries in the region experienced greater declines, as follows:
– Japanese Yen (-24.6%);
– Korean Won (-16.6%);
– Renminbi (-10.1%);
– Philippine peso (-12.1%); and
– Thai baht (-11.1%)
However, the value of the Malaysian ringgit strengthened compared to several foreign currency values as follows:
– Japanese Yen (13.9%);
– Korean Won (7.0%);
– Thai Baht (2.0%) and
– Chinese Renminbi (1.0%).
Trade and Investment
Malaysia’s cumulative trade increased by 31.1% to RM1.87 trillion for period Jan-Aug 2022 compared to RM1.41 trillion for the same period for 2021. Exports increased by 30.3% to RM1.0 trillion (Jan-Aug 2021: RM778.5 billion). Malaysia recorded a surplus trade amounting to RM155.6 billion compared to RM150.1 billion in the same period for 2021.
Malaysia also remains an attractive destination for foreign direct investment (FDI) by recording a higher net inflow of FDI as much as RM41.7 billion in Jan-June 2022 (Jan-June 2021: RM20.2 billion).
The FDI approved by MIDA was recorded at RM87.5 billion for the first half of the year, this is higher when compared to RM86.7 billion for the same period in 2021.
Driving at a conclusion, Minister in the Prime Minister’s Department Datuk Seri Mustapa Mohamed said: “The World economic growth forecasted in 2022 and 2023 by international organisations such as the World Bank and the IMF have been reviewed and lowered. The IMF has revised their projections of world economic growth to 3.2% for the year 2022 in July; compared to 3.6% in April, and 4.4% in January, 2022.
“For the year 2023, the world economic growth forecast has been lowered from 3.8% in January 2022 to 2.9% in July 2022.
Budget 2023, which will be presented in Parliament on October 7, 2022 will continue to focus on strengthening the momentum towards national economic recovery. The means would be to generate a higher sustainable growth in the long term and to ensure a prosperous ‘Keluarga Malaysia’ (Malaysian Family).