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Malaysia’s GDP growth to hit 7% in 2022, says S&P Global economist

S&P Global Market Intelligence projects Malaysia’s gross domestic product (GDP) growth to hit 7% by 2022 due to strengthening domestic demand, strong exports and the reopening of international borders.

According to S&P Global Market Intelligence chief economist for Asia-Pacific Rajiv Biswas, the Malaysian economy rebounded in the first half of the year after significant economic disruption due to the Covid-19 waves.

“The rebound in domestic demand, strong exports and reopening of international borders have helped to support economic growth, with GDP growth forecast to be around 7% in 2022,” said Rajiv in response to theedgemarkets.com’s queries on Wednesday (July 27).

Although global economic growth is expected to moderate, a global recession is not currently projected in the baseline scenario for 2022, Rajiv said.

Global real GDP growth is expected to slow to 2.7% in 2022 and 2.6% in 2023, the economist noted.

“Positive economic growth in the Asia-Pacific region is helping to support global economic expansion in 2022. Mainland China is showing a gradual rebound after lockdowns in the second quarter of 2022 and Asia-Pacific’s emerging markets are achieving solid growth.

“In advanced countries, household finances are generally in good shape, thanks to accumulated savings and asset appreciation in 2020–2021. In a cycle dominated by consumer spending, households are positioned to drive the global expansion forward, despite headwinds from rising world inflation and surging energy prices,” he explained.

BNM to embark gradual path towards normalising monetary policy
Bank Negara Malaysia (BNM) is expected to embark on a gradual path to normalise its monetary policy settings by further withdrawing the degree of monetary accommodation as the economic recovery continues, Rajiv said.

He was responding to a question on whether Malaysia will see another rate hike soon, as the US Federal Reserve is considering another rate hike to curb inflation due to the slowdown in the economy.

“The US and EU [European Union] economies are showing weakening growth momentum, with the US facing the risk of a technical recession.

“Worldwide, the transition from pandemic to endemic for Covid-19 is enabling improving growth in travel, tourism, and other consumer service sectors that were hit hard during the 2020 recession,” he said.

“Although BNM has already tightened monetary policy by several small steps, the pace of policy tightening has been gradual since inflation pressures are more constrained in Malaysia,” he added.

Edited by Lam Jian Wyn
* The Edge Markets