KUALA LUMPUR, Feb 14 — Malaysia’s gross domestic product (GDP) is projected to rebound by 3.0 percentage points to 6.1 per cent year-on-year in 2022 on the back of favourable external conditions, with the full economic reopening by major economies giving the growth momentum an added boost.

Public Investment Bank Bhd said the growth trajectory would also be driven by the lag impact of massive fiscal stimulus spending, supported by the still-accommodative interest rate environment.

It added that the strong push will come from the bold decision to fully reopen international borders, which will be key to reviving the tourism sector that has borne the brunt of the health crisis over the last two years. 

However, this could be tempered by the emergence of a more infectious COVID-19 variant which could cause rapid transmission and therefore, a loss in productivity and output.

“Persistent challenges in the manufacturing sector, like the shortage in raw material and labour, could also affect output,” said the investment bank.

It added that economic prospects are expected to improve following the better handling of Covid-19 and vaccination coverage of more than 90 per cent of the adult population.   

On the monetary policy, Public Investment Bank expects to see normalisation in the benchmark interest rate only in the second half of 2022, with the overnight policy rate (OPR) likely to be adjusted by 50 basis points to 2.25 per cent.

The consumer price index is projected to remain steady at 2.4 per cent in 2022, thanks to full economic reopenings that will push employment and wages, and subsequently, demand for goods and services.

“Cost-push factors such as petrol prices, apart from shortages in raw material and prolonged supply chain disruptions, could cause the price of essential goods and services to be elevated,” it said.

Meanwhile, CGS-CIMB Research retained its forecast of Malaysia’s economic growth for 2022 at 5.6 per cent year-on-year, with growth at 5.1 per cent in the first quarter of the year (Q1 2022). 

Malaysia’s current account is also projected to register a surplus of 4.9 per cent of the GDP in Q1 2022 and 3.2 per cent for the full year, driven by continued high goods surplus from surging commodity prices and growing external demand, as well as the recovery in travel receipts as borders reopen.

Flood recovery efforts could also spur investment growth during the quarter, it said.

As for the monetary policy rate, CGS-CIMB Research also believes that the central bank would hike the overnight policy rate twice in the second half of the year, raising it by 25 basis points each time. — Bernama