MIDF Research expects Malaysia’s gross domestic product (GDP) to grow stronger at 6% in 2022, from 3.1% for 2021, mainly driven by further reopening of the economy such as lifting the ban on international travels, which will support a better growth outlook this year.
The research firm said that with high vaccination rate, there is less need for the government to tighten Covid-19 restrictions, given the ability of the healthcare system to withstand the recent resurgence in Covid-19 infections.
“We therefore expect the momentum of growth will continue to strengthen this year, backed by growing domestic spending, improving labour market and increased business activities.
“Sustained growth in external demand will also support Malaysia’s trade and production activities this year,” it said in its Monthly Economic Review on Monday (Feb 28).
MIDF Research said near-term growth outlook remains positive as growth momentum seen improving with the leading index (LI) increasing to 2.1% year-on-year (y-o-y) in December 2021, compared with 1.6% in November 2021, buoyed by the increment in the number of housing units approved, indicating increased business activities going forward.
Although the Ukraine-Russia conflict will not have a direct significant impact to Malaysia’s trade, MIDF Research view prolonged disruption in the global supply chain, rising commodity prices and higher import costs will be among downside risks to growth outlook.
Meanwhile, MIDF Research noted that Malaysia’s total trade in January 2022 stood at RM203 billion or 24.8% y-o-y higher than January 2021, driven by sustained growth in both exports and imports.
“Exports rose at 23.5% y-o-y in January 2022, sustaining double-digit growth for the sixth straight month.
“The pace of exports growth was, however, more moderate than December 2021 (29.2% y-o-y), reflecting the moderation in manufacturing exports and similar trends observed in regional exports,” it said.
It added that imports growth accelerated to 26.4% y-o-y compared to December 2021 at 23.6% y-o-y, and maintained two-digit growth since February 2021, mainly due to the low base effect as imports previously weakened in January 2021 because of Movement Control Order 2.0.
On Malaysia’s headline inflation rate, January 2022 headline inflation recorded a four-month low, where it eased to 2.3% y-o-y compared to 3.2% y-o-y in December 2021, dragged by lower price growth of non-food.
“Core inflation remained on upward momentum, rose by 1.6% y-o-y, the fastest pace in two-year. The continuous pick-up in core consumer price index indicates the revival effects of growing domestic demand on general prices, amid moderate recovery in labour market and economic reopening,” it said.
On sequential basis, overall inflation data rose at marginal pace, MIDF Research said.
The softening pace seen in headline inflation is expected, following dissipating low-base effects, especially from transport inflation.
- The Edge Markets