With dim outlook on global economy, World Bank says Malaysia’s GDP growth rate to drop to 4.0pc this year
KUALA LUMPUR, Feb 3 — Following an expected growth of 7.8 per cent in 2022, Malaysia’s economy is projected to grow at a “moderate pace” of 4.0 per cent this year, according to the World Bank.
In its “Malaysia Economic Monitor February 2023” report released today, the World Bank attributed the lower growth rate partly to a troubled global economy.
“As a highly open economy, Malaysia will continue to face substantial risks emanating from the external environment,” the World Bank said in its report.
“Shocks to global growth — including higher-than-expected inflation, tighter financial conditions, deeper slowdown in major economies, a prolonged war in Ukraine, and continued lockdowns in China — could cause a sharper-than-expected slowdown in global growth.
“It is estimated that a one percentage point decline in gross domestic product (GDP) growth of the G7 economies and China, could lower Malaysia’s growth by one and 0.7 percentage point, respectively,” it added.
The Group of Seven (G7) refers to the United States, the United Kingdom, Canada, France, Germany, Italy, and Japan.
The World Bank previously announced that global economic growth is forecasted to decelerate sharply to 1.7 per cent in 2023, compared to a 2022 global growth rate of 2.8 per cent.
The report also said that in line with a less supportive global environment, Malaysia’s trade growth is expected to slow down to 2.2 per cent in 2023, while import growth is projected to drop to 2.1 per cent.
On Malaysia’s securities market, the World Bank noted that the main risk of losses are related to the uncertainty surrounding inflation and relatively high debt levels in the country.
Furthermore, it said that government revenue is projected to decrease to 15 per cent of GDP this year — compared to the expected 16.7 per cent in 2022 — as crude oil prices come down.
The main factor that is expected to drive Malaysia’s economic growth this year is domestic private spending.
“Private consumption is forecast to expand at a slower but still relatively robust rate of 6.7 per cent in 2023, sustained by the ongoing improvement in labour market conditions, as well as ongoing household income support from the government,” the World Bank said in its report.
It also expected a continued flow of capital investments into both the private and public sectors — with the manufacturing and services sectors at the forefront of the public sector, while the government is expected to be mainly focused on upgrading public infrastructure and amenities.
Among the related public infrastructure and amenities mentioned were the East Coast Rail Line, Sarawak-Sabah Link Road Phase 2, and the Trans Borneo Highway.