Malaysia: Growth target for 2022 seen to be attainable

KUALA LUMPUR: Malaysia’s gross domestic product (GDP) growth is expected to moderate in the second half of this year (2H22) after having surged 6.9% in 1H22.

Sunway University economics professor Yeah Kim Leng said the slower economic growth anticipated in 2H22 is premised on the rapid cooling of the global economy.

“Key indicators pointing to an accelerated global slowdown include the decline in global leading indicators, monetary tightening amid elevated inflation, the ongoing Russia-Ukraine war, continuing sanctions on Russia and the Chinese economic slowdown due to its zero-Covid policy,” he told StarBiz.

Domestically, Yeah noted that the large inventory build-up in the second quarter of this year (2Q22) coupled with a high base in 4Q21 were key factors accounting for a slower growth.

But he believes that the country’s economic growth in 2H22 would still be “commendable”.

This, he added, would likely be about one percentage point lower than in 1H22.

“My 2H22 economic growth forecast is about 5.7%,” said Yeah.

Nevertheless, he said the country’s official forecast for the GDP growth range of 5.3% to 6.3% in 2022 remained attainable based on current expectations.

MIDF Research, meanwhile, has upgraded Malaysia’s GDP growth to 6.6% in 2022.

This is after the stronger-than-expected GDP of 8.9% in 2Q22.

The research house said that the growth momentum would continue in 2H22.

It will be supported by increased spending and business activities as the economy transitioned into the endemic phase, with Covid-19 restrictions having been relaxed and rising tourist arrivals.

“While measures like the Bantuan Keluarga Malaysia cash handouts and Employees Provident Fund withdrawals helped to boost spending in 2Q22, we may see a more normalised growth for domestic spending towards the latter part of the year.

“Nevertheless, the improving labour market and better income prospects will continue to support domestic spending activity,” it added.

Given the robust domestic demand and external trade sector, MIDF Research said the labour force and employment growth hit new record highs of 3.1% and 4.2% year-on-year (y-o-y), respectively.

“The recovery of Malaysia’s labour market continued as the jobless rate descended to a new pandemic low of 3.8% in June 2022,” it said.

Meanwhile, MIDF Research believes the country’s economy will develop positively in the second half of this year.

This is given the latest leading index (LI) reading.

The LI indicates encouraging signals that growth momentum continues to improve from the reopening of the economy and international borders.

Malaysia’s LI continued to expand at 5.3% y-o-y in June, the fastest annual growth since June 2021.

This was mainly driven by higher real imports of other basic precious and other non-ferrous metals and also boosted by the low base effect.

For external trade, MIDF Research expects the growing external demand especially for electrical and electronics, petroleum and palm oil will support the growth outlook this year.

However, the research house is cautious of possible downside risks from the external front.

This includes weaker growth prospects in major trading partners, namely, China and the United States.

Other possible risks include the escalation of geopolitical tensions and continued disruption in the global supply chain.

Despite these external uncertainties, MIDF Research reckoned that the above-6% growth could be achieved, given the strength and sustained improvement in domestic demand.

Source: https://www.thestar.com.my/business/business-news/2022/09/02/growth-target-for-2022-seen-to-be-attainable