In its latest Economic Update 2021 report, the credit rating agency, however, said the ramped-up vaccination rate in the country is expected to facilitate the reopening of most economic sectors in the fourth quarter, providing a healthy lift to growth.

“For 2022, we have pencilled in a growth forecast of between 7% and 8%.

“Although this is primarily aided by low base effects, the reopening of most sectors of the economy and gradual utilisation of domestic spare capacity should boost underlying growth,” it said in a statement today.

It also noted the continued recovery in global demand, particularly excess demand for semiconductors, which will also buoy Malaysia’s performance next year.

RAM Ratings noted that the overall output for 2022 is expected to recover above the level seen in 2019, estimated to be about 4.8%-5.8% higher.

“Economic conditions are, however, unlikely to fully normalise until after 2022, as the severity of the impact on the economy has resulted in a negative output gap in the short term.

“We estimate that the economy, in aggregate, would operate 5% below its potential output in 2022,” it said.

This translates to about RM75 billion to RM85 billion less in output than could have been achieved without the fallout from the pandemic, it added.

The credit rating agency said the pace of vaccinations remains a key driver of domestic recovery, as is the continued recovery of the global economy.

“Exports are still the bright spot in the Malaysian economy, for which we project a strong rebound (2021: 11.1%; 2022: 4.6%) amid the semiconductor supercycle,” it said.