However, it is maintaining its forecast of 4.5% to 5.5% for 2023.

The rating agency said in its Economic Update 2022 report released today that the robust recovery charted in the first half (H1) of 2022 (6.9% y-o-y) would likely pave the way for the full-year growth to surpass its earlier expectations of 5.3% to 6.3%.

“Economic performance in H1 was buoyed by strong domestic demand (8.6% y-o-y) as the country began its transition to the endemic phase.

“The rebound in consumption was also enabled by a steady recovery in the labour market, which saw the unemployment rate fall to 3.8% in June,” it said.

Exports, another key contributor, grew 6.1% y-o-y in volume terms in H1 despite ongoing global supply chain disruptions, RAM noted.

The country’s overall output in 2022 will only be 4% higher by RAM’s estimates compared with the 2019 level, it said, adding this and the negative output gap suggests there is still slack capacity to drive growth next year.

“We continue to be cautious about looming headwinds that could intensify further in the coming months and into 2023 as global inflation stays persistently high and global central banks remain focused on achieving price stability through aggressive interest rate hikes,” it said.

“These developments, along with China’s ongoing economic slowdown, are expected to dampen global demand and economic prospects moving ahead,” it said.

Closer to home, expectations of another overnight policy rate hike in September and high food inflation could blunt domestic consumption, it added.