External challenges could weigh on economy
PETALING JAYA: The Malaysian economy is not out of the woods yet despite the strong growth in the first quarter (1Q22).
The external challenges and domestic headwinds could weigh on the country’s economy this year. Nevertheless, economists said there are bright spots that would spur the economy on a stronger footing. Gross domestic product (GDP) in 1Q22 improved further, expanding by 5.0% year-on-year (y-oy) following a 3.6% y-o-y growth in the 4Q21.
The GDP, however, declined by 3.0% from the previous quarter on a non-seasonally adjusted basis, after increasing in 4Q21 by 10.5% quarter-on-quarter (q-o-q).
Ambank Group chief economist Anthony Dass, who is also a member of the Economic Action Council Secretariat, said looking into the rest of 2022, upside to the economy remains.
However, he said the ongoing external challenges remain a concern to the domestic economy. These include the Russia-ukraine war, China’s zero-covid-19 policy, aggressive rate hikes, any further sanctions by Western allies on Russia, geopolitical tension in Sri Lanka leading to any backlash in other countries, risk of a debt crisis and financial markets’ volatility.
Besides external headwinds, he said on the domestic side, the economy is expected to experience some pressure from supply chain disruptions, rising cost and increasing living cost.
Dass said: “Upside to the economy, among others, will be underpinned by the continuous positive contribution from the global demand for semiconductors’, firm commodity prices, export-led manufacturing activities, consumer and business sentiments and reopening of the borders.
“Various stimulus measures, measures under Budget 2022, 12 Malaysia Plan, better Covid-19 management, strong foreign direct investments, tighter labour market resulting in better wages, EPF withdrawal impact and low growth of 3.1% in 2021 all bodes well for the economy said.”
Overall, he expects GDP growth to be around 5.6% this year as the base case, with an upside of 6.0% and downside of 4.5%.