Gross domestic product (GDP) growth for the month December rebounded to 3.6% from a year earlier, Bank Negara Malaysia (BNM) said today. That pushed the full-year GDP up to 3.1% and within the official forecast range of 3%-4%.
Growth is expected to accelerate going forward as Malaysia rolls out vaccine booster shots and prepares to reopen its borders. The country is poised to benefit from stronger global demand and higher private spending in 2022, according to the central bank.
All sectors of the economy showed improvement in the last quarter, BNM governor Nor Shamsiah Mohd Yunus said in a briefing today, adding that momentum through this year will be driven by global demand and trade, as well as the resumption of domestic activity.
“Going forward, Malaysia’s GDP should be able to record respectable growth, given there are likely to be fewer restrictions on mobility following the indication that international borders would reopen in March,” said Afzanizam Abdul Rashid, chief economist at Bank Islam Malaysia Bhd.
He added that the economy is expected to grow 5.5% in 2022, but warned of the risks to the forecast from supply chain issues and the prospect of higher borrowing costs.
Malaysia’s main equity index rose 0.2% at the midday break, poised for its biggest weekly gain this year. The ringgit fell 0.1% to 4.1880 per dollar while 10-year bond yields were up two basis points to 3.72%.
Policy support
Nor Shamsiah added that cost pressures remain from high commodities prices and supply-chain issues, and that inflation is expected to edge up this year while its core measure will remain “modest.”
She cautioned that there would be an impact on the economy from “premature withdrawal” of monetary policy support.
“We will remain vigilant of the latest developments and any new data. Any adjustment to the degree of accommodation will depend on how these developments will affect the growth and inflation outlook,” she said.
Given the nation’s current-account surplus, BNM can “still afford to hold out a bit more unlike some of its EM peers” on raising rates, said Wellian Wiranto, an economist at Oversea-Chinese Banking Corp (OCBC) in Singapore.
“We see a rate hike to come only in 3Q, and by a muted 25 basis points this year.”
Risks to Malaysia’s outlook include slower-than-expected global growth and financial market volatility, higher commodity and energy prices and worsening supply-chain disruptions, as well as tighter pandemic restrictions domestically, Nor Shamsiah said.
The official GDP forecast this year is for 5.5%-6.5% expansion, with the central bank set to announce any revisions on March 30.
Avoiding lockdown
Malaysia has said it will avoid a repeat of last year’s lockdowns that pushed GDP into contraction for two quarters. The country’s rising vaccination rate – about 54% of the adult population have received booster shots as of Feb 10 – has kept hospital admission rates manageable amid the Omicron wave.
That prompted a government advisory council to propose the country reopen its borders from March 1, potentially boosting consumer spending and benefiting key sectors such as banking and construction.
That came days after the health ministry said it would recommend such a move only after the booster rate improved.
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