The research firm has maintained its growth projection for Malaysia’s gross domestic product (GDP) at 6% on the back of the reopening of the economy and the absence of strict movement controls.

“Moving into the endemic phase, the further relaxation of Covid-19 restrictions, including the reopening of international borders, will allow activities in the domestic economy to continue growing going into the latter half of the year,” it said in its latest monthly economic review.

MIDF said that as domestic demand strengthened, core inflation surged to an almost five-year high, rising by 2.4% year-on-year (y-o-y), the fastest gain since August 2017.

“The continuous upward trend in core consumer price index indicates the underlying price pressures from surging domestic demand, underpinned by improving labour market conditions and domestic reopening effects,” it said.

It noted that the leading index signalled improving growth momentum as the country registered improvement with a slower decline of minus 0.5% y-o-y in April 2022 (March: minus 1.4%).

“The slower decline points to better growth prospects for Malaysia’s economy in the near term.

“It is more encouraging that the current economic condition in Malaysia continued to show improvement, with the coincident index growing faster at 5.3% y-o-y (March 2022: 3.1%), the fastest expansion in 11 months,” it said.

The research house expects the further reopening of the economy and resumption of business operations to result in the continued improvement in domestic economic activities.

MIDF also noted that exports grew stronger than expected in May 2022 at 30.5% y-o-y in May 2022, supported by increased shipments to regional countries and stronger re-exports.

Imports growth grew even faster at 37.3% in May 2022 (April 2022: 22.1%) on the back of continued improvement in domestic economic activities and high commodity prices.

“Malaysia will also benefit from the growing external demand for electrical and electronics and commodities, particularly palm oil and petroleum products,” it said.

Nevertheless, MIDF noted that it is still cautious about external developments which could affect the country’s economic outlook.

“These include downside risks such as global inflation risk, the slowdown in China and the global economy, prolonged disruption in the global supply chain, the ongoing war in Ukraine and the more hawkish stance of central banks,” it added.