Thailand
Malaysia economy rebounds while inflation, growth risks eyed
[KUALA LUMPUR] Malaysia said its economy returned to expansion at the end of 2021 amid easing pandemic restrictions, while flagging risks for this year from inflation, further virus disruptions and global growth.
Gross domestic product (GDP) growth in the December quarter rebounded to 3.6 per cent from a year earlier, Malaysia’s central bank said Friday (Feb 11), beating the 3.3 per cent median growth expected in a Bloomberg survey. That pushed full-year GDP up 3.1 per cent, within the official forecast range of 3 to 4 per cent.
Growth is expected to accelerate going forward as Malaysia rolls out vaccine booster shots and prepares to reopen its borders. The country is poised to benefit from stronger global demand and higher private spending in 2022, according to the central bank.
All sectors of the economy showed improvement in the last quarter, Bank Negara Malaysia Governor Nor Shamsiah Mohd Yunus said in a briefing Friday, adding that momentum through this year will be driven by global demand and trade, as well as resumption of domestic activity.
“Going forward, Malaysia’s GDP should be able to record respectable growth, given there are likely to be fewer restrictions on mobility following the indication that international borders would reopen in March,” said Mohd Afzanizam Abdul Rashid, chief economist at Bank Islam Malaysia.
The economy will likely grow 5.5 per cent in 2022, he said, while flagging risks to the forecast from supply chain issues and the prospect of higher borrowing costs.
Malaysia’s main equity index rose 0.2 per cent at the midday break, poised for its biggest weekly gain this year. The ringgit fell 0.1 per cent to 4.188 per dollar while 10-year bond yields were up 2 basis points to 3.72 per cent.
Shamsiah added that cost pressures remain from high commodities prices and supply-chain issues, and that inflation is expected to edge up this year while its core measure will remain “modest”. She cautioned that there would be an impact on the economy from “premature withdrawal” of monetary policy support.
“We will remain vigilant of the latest developments and any new data,” she said. “Any adjustment to the degree of accommodation will depend on how these developments will affect the growth and inflation outlook.”
Given the nation’s current account surplus, Bank Negara Malaysia can “still afford to hold out a bit more unlike some of its EM peers” on raising rates, said Wellian Wiranto, an economist at OCBC in Singapore. “We see a rate hike to come only in Q3, and by a muted 25 basis points this year.”
Risks to Malaysia’s outlook include slower-than-expected global growth and financial market volatility, higher commodity and energy prices and worsening supply-chain disruptions, as well as tighter pandemic restrictions domestically, Shamsiah also said Friday.
The official GDP forecast this year is for 5.5 to 6.5 per cent expansion, with the central bank set to announce any revisions on Mar 30.
Malaysia has said it will avoid a repeat of last year’s lockdowns that pushed GDP into contraction for 2 quarters.
The country’s rising vaccination rate – about 54 per cent of the adult population had received booster shots as of Thursday – has kept hospital admission rates manageable amid the Omicron wave. That prompted a government advisory council to propose the country reopen its borders by March, potentially boosting consumer spending and benefiting key sectors such as banking and construction. That came days after the Health Ministry said it would recommend such a move only after the booster rate improved.
Compared to the previous 3 months, the economy last quarter grew 6.6 per cent on a seasonally adjusted basis, compared to a 6.3 per cent median expectation in the Bloomberg survey. BLOOMBERG