KUALA LUMPUR – A hopeful economic outlook for Malaysia is expected this year, says the International Monetary Fund (IMF).
The agency expects Malaysia to be on track to achieving economic expansion of 5.75% in 2022 due to the robust domestic demand with continuous external demand as well.
The country’s government had also projected the nation’s gross domestic product (GDP) to be between 5.3% and 6.3% this year, given current global risks that are being faced worldwide.
When assessing Malaysia’s growth outlook, the IMF highlighted that the nation has high vaccination rates with relaxed movement controls, both that would help support economic expansion.
However so, the IMF also acknowledges that there are still headwinds bringing risks to the growth outlook such as effects of the COVID-19 pandemic and the Russia-Ukraine war.
The IMF’s Executive Board remarked that Malaysia’s medium term growth outlook is expected to be solid but that the country could have long-term risks of economic scarring as well. The board came to the conclusions after consulting with Malaysian officials about an assessment report that was released in April.
Additionally, the agency had welcomed Malaysia’s accommodative monetary policy standing as inflation expectations would be kept well anchored.
Bank Negara Malaysia’s (BNM) decision to not peg the ringgit will continue to benefit Malaysia, the IMF added, although the currency’s volatility remains.
Prior to this, BNM’s governor, Tan Sri Nor Shamsiah Mohd Yunus, said that the central bank believes there are significant risks to pegging the ringgit and that the action would not be in Malaysia’s best interest.
The stance was backed by the resilience of the country’s banking sector, being well-capitalised, highly liquid and cushioned by robust high-quality assets.
In regards to that, the IMF further stated that Malaysia’s banking sector “remains resilient” with the support of the nation’s policies that prioritised inclusion, economic transformation and sustainability.
The Malaysian government introduced stimulus and other policies to ensure that the nation had proper assistance in recovering from the pandemic.
The IMF, with over 190 member countries, had praised the implementation of the 12th Malaysia Plan which focuses on driving labour productivity, developing the digital and green economies, and further strengthening fiscal governance.
All those would contribute to minimising further pandemic-related economic damage while at the same time promote inclusive growth and create more jobs, the agency added.
It emphasises on the assessment made by IMF staff that Malaysia’s external position was considered as moderately stronger than suggested by economic fundamentals and desirable policies.
It highly recommends that policies should bolster social safety nets in order to foster an inclusive recovery ecosystem and facilitate external rebalancing, actions which are already taken by Malaysia though its multi-billion ringgit budgeting for COVID-related issues.
In analysing 2021, the IMF stated that Malaysia’s economic had rapid, substantial and multi-pronged pandemic policy response.
The year saw RM39 billion spent on COVID-related matters. This is roughly 2.5% of the country’s GDP and more than doubled the originally budgeted RM17 billion.
The IMF explained that that was among the reasons Malaysia’s deficit had reached 6.5% of is 2021 GDP, higher than the projected 5.5% in the 2021 Budget. The national debt is around an estimated 63% of GDP, lower than the domestic debt ceiling of 65% set.
Since its establishment in July 1944 following the Great Depression era in the US, the IMF aims to assist its member nations to achieve sustainable economic growth and prosperity.
The agency voices out supports for economic policies that nurture financial stability and monetary cooperation. These factors are key to improving productivity, creating jobs, and the overall well-being of the economy.
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