KUALA LUMPUR, March 30 — Malaysia’s real gross domestic product for this year is expected to grow between 5.3 and over 6 per cent, underpinned by stronger global trade and the reopening of international borders, Bank Negara Malaysia (BNM) said today.
South-east Asia’s third biggest economy grew 3.1 per cent in 2021, a rebound from 2020’s contraction supported by the easing of movement curbs and higher vaccination even as Covid-19 continued to shape the global economy.
BNM Governor Tan Sri Nor Shamsiah Yunus told a press conference this morning she believes the country’s economic recovery is on “firm footing” although the novel coronavirus and the ongoing Russian-Ukrainian conflict still pose risks.
But the impact will likely be mitigated by a highly diversified economy, Nor Shamsiah suggested.
“Having said that, I also would like to highlight that Malaysia has a diversified economy with various sources of growth and an export structure, which underpins our economic resilience,” she said.
The central bank predicted headline inflation to average between 2.2 and 3.2 per cent this year in its Economic and Monetary Review 2021 released today.
It said high input costs could put some pressure on selected fresh food prices although price controls will likely keep the inflation under control.
It added that core inflation is expected to average higher between 2.0 and 3.0 per cent in 2022 due to stronger demand conditions amid cost pressures.
But the continued slack in the economy and sluggish hiring could neutralise some of the effects. Labour market conditions are expected to improve this year as economic activity picks up.
“The unemployment rate is expected to decline further to around 4 per cent of the labour force.
“This sustained recovery in employment and income is expected to drive an improvement in household spending,” BNM said in the report.
It also said monetary policy will remain “accommodative” to support a sustainable economic recovery while ensuring price stability.
BNM has kept interest rates at record low throughout last year as the country deals with the pandemic, although there are forecasts that it could bump the rates later this year as inflation picks up.
“BNM is cognisant of the consequences of keeping interest rates low for an extended period of time.
“As the outlook for inflation remains largely supply-driven, BNM is closely monitoring for any signs of potential second-round effects, where price pressures could become more entrenched as domestic demand recovers,” it said in the report.
