KUALA LUMPUR, Jan 12 ― AmBank Research is forecasting the Malaysian economy to grow by about 5.4 per cent this year following an estimated slower growth of 3.4 per cent in 2021.
The research house said the 5.4 per cent growth was projected as the base case, with the upside at 6.0 per cent and downside risk at 3.5 per cent.
“Notwithstanding the low base of 2021, 2022’s growth momentum is supported by the positive impetus of high Covid-19 vaccination coverage and the ongoing booster rollout.
“This has resulted in less restrictive measures since July 2021 that saw the reopening of most economic activities without the risk of further lockdowns,” it said in a note today.
AmBank Research said apart from the low base, growth in 2022 would also be spurred by private consumption, domestic-driven private investment, implementation of approved foreign direct investments in the manufacturing and services sectors, and public expenditure.
It said exports and firm commodity prices would also continue to underpin growth this year.
“The ratification of the Regional Comprehensive Economic Partnership (RCEP) would support growth in both domestic and export-led business activities,” it added.
Furthermore, it said, the overall macro policy would remain pro-growth supported by an expansionary Budget 2022, with measures and incentives being introduced for the people and stimulus measures of RM530 billion, in addition to the rollout of the 12th Malaysia Plan.
Ambank Research expects inflation to stay elevated in first half (H1) of 2022.
“The risk is that these higher levels of inflation will get baked into the ongoing wage and price behaviour.
“Besides, any further Covid-19 related disruptions to supply chains further support the upside risks on inflation,” it said.
Based on the rising inflation, the research house said it had raised its call on the US Federal Reserve to raise rates in 2022 from twice to three or four times.
As for Bank Negara Malaysia (BNM), AmBank Research said the central bank was expected to revise upwards the Overnight Policy Rate once or twice in 2022 to keep the interest rate differential between the United States and Malaysia at 175-225 basis points.
“BNM is expected to chart the pathway for higher interest rates in the second half (H2) of 2022, with one or two rate hikes by 25 basis points on each hike. Economic growth momentum, rising inflation and addressing interest rates differential would be the major factors supporting a rate hike,” it said.
It added that the 10-year Malaysian Government Securities yield was expected to hover at about 3.9 to 4.0 per cent this year.
On the ringgit, AmBank Research expected the local currency to stay weak in H1 2022 and pull back slightly in H2 2022.
It projected the ringgit to experience selling pressure in the first half-year, which could see it reach the 4.25 level and possibly touching 4.30.
“Expectations are that the local currency in H2 2022 will pull back from its weakening trend to hover around the 4.20 level in that period,” the research house said, adding that this would be driven by greater clarity on external and domestic fronts. ― Bernama