By Rozanna Latiff and Mei Mei Chu

KUALA LUMPUR (Reuters) – Malaysia’s economy returned to growth in the fourth quarter of last year, as coronavirus curbs were lifted and economic activity resumed.

Gross domestic product rose 3.6% in the October-December period, the central bank said on Friday, faster than the 3.3% rise forecast in a Reuters poll and up from a 4.5% decline in the previous quarter.

Malaysia’s full-year economic performance expanded 3.1% in 2021, rebounding from the 5.6% drop in 2020, the country’s worst annual performance since the 1998 Asian Financial Crisis.

The government said last year’s economic performance was still below pre-pandemic levels in 2019 but recovery was expected to continue in line with improved global and domestic demand. The central bank is projecting 2022 growth of between 5.5%-6.5%.

Risks remain tilted to the downside, however, mainly due to COVID-19 developments, BNM Governor Nor Shamsiah Mohd Yunus told a news conference.

“The key areas emanate from the resurgences of severe and vaccine-resistant COVID-19 variants of concerns that could lead to renewed containment measures globally and domestically, which would disrupt the economic recovery,” she said.

Malaysia has seen a resurgence in COVID-19 cases in recent weeks amid a spike in infections caused by the highly transmissible Omicron variant of the coronavirus.

However, the government has vowed not to reimpose lockdowns amid a ramped-up COVID-19 inoculation programme.

Nearly 80% of the country’s 32 million population has received at least two doses of COVID-19 vaccine, while more than a third has received a booster.

Last month, the central bank left its key interest rate unchanged at a record low of 1.75% to support continued recovery.

Nor Shamsiah said Malaysia’s headline inflation is expected to remain moderate this year and denied speculation that Malaysia was experiencing signs of hyperinflation or stagflation.

“This inflation outlook, however, is still subject to the latest global commodity price developments and risk from supply-related disruptions,” she said.

($1 = 4.1840 ringgit)

(Writing by Rozanna Latiff; Editing by Sam Holmes)

Copyright 2022 Thomson Reuters.