Economic recovery underway but global risks are abound for Malaysia

KUALA LUMPUR – Despite the fact that Malaysia is on the path to economic recovery, there are risks ahead due to the uncertain global economic conditions, said Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz.

In his opening keynote address at the Malaysian Student Leaders Summit XVI 2022 recently, the minister said that Malaysia had a solid first quarter for 2022, with the gross domestic product (GDP) growth at 5% and being on course to reach 5.4% to 6.3% economic growth this year.

Additionally, the unemployment rate for Malaysia had fallen to 3.9% in May and June of this year, continuing its downward trend for 14 straight months, he stated.

Furthermore, the country’s trade performance had remained resilient, retaining its economic growth momentum, with trade data showing double digit increases for 16 straight months since February of 2021.

He explained that since the systematic reopening of Malaysia’s economic activities, ongoing growth of domestic and external demand, as well as the decline in unemployment, foreign investors have been feeling more optimistic about the country’s prospects.

“All of these data, not to mention the return of traffic jams and crowded restaurants, indicate that our second-quarter GDP estimates may be robust, which will further validate our policies that have put Malaysia on the path to economic recovery,” he added.

Despite that, Tengku Zafrul stated that Malaysia faces risks and challenges to economic recovery, such as rising global inflation as commodity prices continue to rise and supply chain disruptions caused by the ongoing Russia-Ukraine conflict

He said that the country’s inflation rate hit a one-year high at 3.4% in June this year and food inflation at 6.1% during the same month. However, the government has been able to mitigate the impact through subsidies and price restrictions on some critical goods.

Apart from that, he also noted that global economic growth has slowed as a result of the higher-than-anticipated inflation globally, particularly in the US and key European nations, prompting tighter monetary policies.

A downturn in China’s economy, in part as a result of its zero COVID-19 policy, and the impact of the Russian-Ukrainian conflict are also contributing to the uncertainties.

These factors led to the International Monetary Fund lowering Malaysia’s economic growth forecast from 5.6% to 5.1%, he said, adding that it is below the official projections of 5.3% to 6.3%.

“At this juncture, we remain optimistic that we will be able to reach the range of our official projections,” he stated.