KUALA LUMPUR – The latest report from the International Monetary Fund (IMF) shows Malaysia’s growth forecast for the year reduced from 5.6% to 5.1%.
The fund’s recently published World Economic Outlook Update July 2022, shows the IMF’s latest forecast is lower than the gross domestic product growth range projection set by Bank Negara Malaysia for the year, which is around 5.3% to 6.3%.
According to the fund, the overall risks to the global economic outlook is presently “overwhelmingly tilted to the downside.”
The IMF stated that factors such as the Russia-Ukraine war might lead to an abrupt stop of European gas imports from Russia; while inflation could be harder to tame than anticipated if the labour markets are tighter than expected or if inflation expectations become unanchored.
“Tighter global financial conditions could also cause debt distress in emerging markets and developing economies while the reemergence of COVID-19 outbreaks, lockdowns, and the further escalation of the property sector crisis could further suppress China’s growth. The geopolitical fragmentation could possibly impede global trade and cooperation as well,” the fund explained.
As rising prices continue to erode global living standards, the IMF stated that containing inflation should be the top goal for governments.
“Tighter monetary policies will unavoidably incur real economic costs, but delaying their implementation will only exacerbate them,” IMF added.
“However, tighter monetary conditions will also have an impact on financial stability, necessitating judicious use of macroprudential tools and making revisions to debt resolution regimes all the more imperative,” IMF continued.
To aid the situation, the fund suggested that targeted fiscal support can help soften the impact on the most vulnerable group although with the given strain on governmental budgets due to the pandemic, and the need for a disinflationary overall macroeconomic policy, the policies will be required to be offset by increased taxes or reduced government spending.
“Therefore, the policies to address specific impacts on the prices of energy and food should target those most impacted without distorting the prices,” IMF said.
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