KUALA LUMPUR – Malaysia’s economy outlook continues to be optimistic for economists and analysts reviewing it.
The experts are of the opinion that Malaysia’s domestic demand and the private sector will both act as primary drivers towards the growth of the country’s economy on the path ahead.
On May 13, Bank Negara Malaysia (BNM) announced that Malaysia’s gross domestic product (GDP) recorded a growth of 5% for the first quarter of 2022 (Q1 2022). During the same period for 2021, GDP was at a contraction of 0.5%.
With the data, the experts are considering it as a positive indicator for the nation’s economic growth overall.
Lee Heng Guie, executive director of Socio Economic Research Centre Malaysia (SERC), said to Bernama that Q1 2022 recorded data which exceeded expectations set by economic analysts that made speculations supported by recovering remand as well as a stronger labour market.
He stated that the number is good and further exceeded his own projection of between 4.6% to 4.8% for the reviewed quarter.
Furthermore, he explained that Malaysia’s economy was in the process of adapting itself to the current economic climate but he anticipates that GDP results for quarter two this year would be much better, likely hitting a number closer to 6%.
Despite that, Lee cautions that there would be impact on business costs and higher inflation rate brought on by ongoing factors such as the Russia-Ukraine conflict, China’s lockdown policies, and the continuous supply chain disruptions in the second half of 2022 (2H 2022).
Although the fundamentals are still in place, Lee stated the global headwinds are dampening overall growth performance. However, he added that domestic demand will still be a key driver for growth for the next quarter and beyond.
Meanwhile, Dr Mohd Afzanizam Abdul Rashid, Bank Islam’s chief economist, remarked that the Malaysia’s economy rebounding was caused by reopening economy which was crucial households and businesses to perform transactions and improve GDP overall.
Also speaking to Bernama, he said that with the current trajectory path, the overall 2022 GDP growth prospect of between 5.3% to 6.3% is attainable.
The results of Q1 2022 was higher than expected due to the growth of domestic demands which were namely the consumption and investment, he stated.
Additionally, he also believes that the GDP growth was what made BNM increase their overnight policy rate (OPR) by 25 basis points recently as well and that further OPR hikes are likely with more sustainable economic recovery.
OCBC Treasury Research and Strategy economist, Wellian Wiranto also echoed the sentiment that the robust GDP is in line with BNM’s monetary tightening stance announced recently.
He believes that the Monetary Policy Committee (MPC) July meeting may pause the stance but likely to increase the OPR again in September as it is aligning to its pledge to tighten policy in a “measured and gradual way”.
According to Wiranto, the improvements in domestic demand and indicators of the recovering labour markets are surely the contributors to BNM’s OPR hike decision. This is particular as underlying core inflation is expected to increase to a range of between 2% to 3%.
During the announcement of Malaysia’s economy Q1 2022 performance recently, BNM had emphasised on the importance to recalibrate monetary policy in order to avoid the need for aggressive interest rate hikes.
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