KUALA LUMPUR, Aug 12 — The Malaysian economy is expected to grow between 5.3 per cent and 6.3 per cent in 2022, given its strength in the first half of 2022 which grew by 6.9 per cent, despite the expected slower global economic growth this year, said Bank Negara Malaysia (BNM) governor Tan Sri Nor Shamsiah Mohd Yunus.

She said the projected growth for the remainder of 2022 and 2023 would be driven mainly by private sector expenditure, particularly by the tourism sector, which is expected to normalise to pre-pandemic levels.

In the second quarter of 2022 (Q2 2022) private investment grew by 6.3 per cent from 0.4 per cent in Q1 2022 due to improvement in structures and continued expansion in machinery and equipment investments.  

“Investment activities also stand to benefit from the realisation of projects such as MyDigital and the East Coast Rail Link,” Nor Shamsiah said during a joint press conference by BNM and the Department of Statistics Malaysia on the country’s Q2 2022 gross domestic product (GDP) performance here, today.

She noted that supply chains were also expected to ease as receding COVID-related disruptions and slowing global trade have alleviated some of the pressures, going forward.

“These would offset the expected moderation in global growth. There are also several factors underlying the resilience of our exports,” she added. 

Nevertheless, Nor Shamsiah said the growth outlook continued to face challenges with a more severe deceleration in global growth is a key downside risk factor.

“This could stem from multiple factors, including overtightening of monetary policy in the United States, energy crisis in the euro area and renewed lockdowns in China. 

“Supply chain disruptions could worsen, with further increase in global commodity prices, if geopolitical conflict escalates. Supply conditions could be further exacerbated by more acute labour shortages or adverse weather conditions,” she added.

Nor Shamsiah pointed out that stronger cost and price pressures could dampen household spending and investment activity, weighing on the economic recovery. These outweigh upside risks from a stronger labour market, rapid improvement in tourism, and any additional domestic policy measures. 

Uneven Recovery

BNM recognised that the economic recovery was uneven, and improvement in some segments have continued to lag behind others.

While most economic sectors have recovered strongly, Nor Shamsiah noted that about 20 per cent of the economy still remain below pre-pandemic levels and this was most severe in the construction sector due to labour shortages and higher input prices.

However, tourism-related industries have only recently begun to recover, she added.

The construction sector rebounded to grow 2.4 per cent in the Q2 2022 against a contraction of 6.2 per cent in Q1 while the services sector jumped to 12 per cent from 6.5 per cent.

“In the labour market, the recovery amongst vulnerable groups, particularly the youth and elderly along with low-skilled workers, is slower relative to other groups in the labour market.

“It is for these reasons, while macro policies are recalibrated as the overall economy recovers, targeted policies would continue to support these segments of society,” she added.

Structural Reform

As the economy continues on its recovery path, policy priorities should now also accord a stronger focus on longer-term policies to complement short-term measures to secure a sustainable and inclusive growth and boost Malaysia’s resilience against future shocks, said Nor Shamsiah. 

She pointed out that these structural reforms would propel Malaysia’s growth by generating high-quality and high-income jobs for Malaysians and improve the well-being of the people.

Several critical areas of focus include attracting quality investments that can generate high value-added activities and high-income jobs for Malaysians, developing a high-skilled workforce ready for the economy of the future, as well as accelerating automation and digitalisation, she said.

The central bank is also urging for the enhancement of social safety nets and improving social protection frameworks funded through a more targeted subsidy regime as well as advancing the environmental, social, and governance agenda to ensure Malaysia remains competitive on the global front. 


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