In a research note today, it said the unemployment rate forecast would be further supported by ongoing government policies such as the wage subsidy programme, and further improvement in the services sector, especially those related to tourism activities.

“Given the solid recovery in labour market conditions with the unemployment rate improving to 3.9% in the second quarter (Q2) of 2022, we expect Q2 gross domestic product (GDP) growth to expand to 7.7% amid the expected strong private consumption and expansion in the services sector,” it said.

The research house has retained its 2022 GDP growth forecast at 5% to 5.5%.

Malaysia recorded a downward trend in the unemployment rate to 3.8% in June 2022, which is the lowest since the Covid-19 pandemic hit the country, with the number of unemployed decreasing to 630,600 people in June 2022 from 637,700 people the previous month.

Similarly, Hong Leong Investment Bank Bhd expects the labour market to continue its recovery momentum in the coming months as the economy continues to recover from the pandemic, especially in the services sector.

“However, the shortage of migrant labour continues to impact many economic sectors, with Malaysia still not seeing a significant return of foreign workers,” it said.

As such, the research house has maintained its 2022 GDP forecast at 5.9% year-on-year and expects Bank Negara Malaysia to raise the overnight policy rate (OPR) by a further 25 basis points in September, bringing the OPR to 2.5% by the end of 2022.