IMF expects Malaysia to post 5.75pc GDP growth this year

KUALA LUMPUR: The International Monetary Fund (IMF) is optimistic that Malaysia’s economy will expand by 5.75 per cent this year, driven by pent-up domestic demand and continued strong external demand.

This is in line with the government’s projection of a between 5.3 and 6.3 per cent growth. The economy expanded by 3.1 per cent last year.

In providing an assessment of Malaysia’s growth prospects, the IMF noted that the country’s high

Covid-19 vaccination rates and limited movement restrictions would support the economic expansion.

On the flipside, the Washington-based agency acknowledged that there were substantial downside risks, including from the pandemic and the Ukraine-Russia conflict, a similar predicament faced by both developed and developing economies.

“Malaysia’s growth is projected to be solid in the medium term, although risks of long-term economic scarring are real,” said the IMF’s Executive Board in its conclusions following consultations with Malaysian officials in an assessment report.

The IMF also welcomed Malaysia’s accommodative monetary policy stance, as inflation expectations are well anchored.

To this end, the IMF said Malaysia’s commitment to exchange rate flexibility would continue to serve the country well.

Bank Negara Malaysia had last week reaffirmed its position that it would not peg the ringgit despite the apparent weakness of the currency.

The IMF also said Malaysia’s financial sector “remains resilient”, and that it was encouraged by its reforms that focused on inclusion, economic transformation and a sustainable economy.

The IMF also lauded the implementation of the 12th Malaysia Plan as it focused on boosting labour productivity, enhancing the digital and green economies, and strengthening fiscal governance.

“This would help minimise pandemic-related economic scarring while promoting inclusive growth and job creation,” it said.

The IMF also called for policies to strengthen social safety nets to support an inclusive recovery and facilitate external rebalancing, which Malaysia was already doing via its multi-billion ringgit pandemic-related budgeting.