KUALA LUMPUR, Dec 6 — There are some glimmers of hope for Malaysia’s economic recovery moving into 2022, driven by, among others, the high vaccination rate which should allow a more sustainable economic reopening even if the Covid-19 pandemic has had its way of sneaking up despite such protection.

OCBC Treasury Research’s — OCBC First-Half (1H) 2022 Global Outlook Report released today stated that there is a good chance of economic recovery picking up speed, from what is likely to be a subpar 3.2 per cent in 2021 to a more encouraging 5.0 per cent growth in 2022.

“While the government has telegraphed a 5.5-6.5 per cent 2022 growth outlook, we are more conservative partly because we see a more contained recovery in private consumption as households try to rebuild their savings that have been depleted considerably during the pandemic bouts,” it said.

Meanwhile, OCBC said a political détente that the new government has struck with the opposition should offer some calm, even if the spectre of election fight is never too far away and may rekindle political uncertainties.

Overall, it said, despite the Gross Domestic Product (GDP) miss in the third quarter of 2021 (Q3 2021), the authorities would likely still put on a brave face and focus on the improving outlook instead.

The confident tone is warranted in that the pandemic resurgence appears to have come under better control, and that vaccination rate in Malaysia has climbed rapidly with 76 per cent of its total population having received both shots.

“To be sure, the reopening initiatives — the travel lanes with Singapore and Indonesia being the most evident example — would give some boost to the economy.

“However, we remain watchful of the fact that the Employees Provident Fund’s (EPF) withdrawal schemes that were an integral part of the stimulus packages have resulted in a cleaving off of savings for households that might take a while to rebuild, resulting in curtailed consumption growth in the coming years,” it said.

Against the backdrop of a better economic recovery outlook, OCBC sees Bank Negara Malaysia (BNM) refraining from any rate cut.

“After all, it kept its policy rate unchanged throughout the whole of 2021, despite the overt challenges posed by the pandemic and political crises of the period.

“Indeed, judging from its tone in the November 2021 Monetary Policy Committee (MPC) meeting, it might have started to lay the groundwork in preparation for greater expectation for the rate to move the other way,” it said.

OCBC said there are aspects from the MPC statement that suggest that BNM is now anticipating the need to preempt any rise in market anticipation for policy rate hike in Malaysia.

“To us, we continue to see a central bank that will be committed to supporting growth for as long as it can by keeping the policy rate anchored at the current low level. Inflation should remain broadly anchored as well given the lingering output gap.

“For instance, the unemployment rate remains lofty at 4.6 per cent. Even if it has come down from the peak of 5.3 per cent last year, it remains well above the 3.3 per cent pre-pandemic run rate, just one sign of how the impact of the pandemic on the labour market remains far from being resolved,” it said.

Hence, OCBC said its baseline remains that BNM can and will leave its overnight policy rate (OPR) unchanged at 1.75 per cent throughout 2022.

“Such a view will require ‘cooperation’ from a few factors, naturally. Apart from domestic inflation out-turn into next year, perhaps what matters more ultimately will be the global market sentiment, especially when it comes to any marked upshift in the US Federal Reserve fund rates outlook,” it added. — Bernama