Malaysia's solid first quarter GDP heralds further policy tightening
Malaysia's economic growth picked up pace in the first quarter and was likely to accelerate further this year amid sustained demand and the reopening of international borders, the central bank said yesterday.
Gross domestic product rose 5 per cent in the January-march period, faster than the 4 per cent expansion forecast by a Reuters poll and up from 3.6 per cent growth in the previous quarter.
Bank Negara Malaysia (BNM) said it had factored in global supply chain disruptions, the Russia-ukraine conflict and strict lockdowns in China to stem the COVID-19 outbreak in its growth projections for 2022.
"Although the downside risks have risen on the global front, we are confident of our growth trajectory and we do not see a risk of any recession in Malaysia," she told a news conference.
The central bank said in presentation slides that growth would expand further. "In 2022, growth will be supported by continued expansion in global and domestic demand."
BNM kept its 2022 economic growth forecast at between 5.3 per cent-6.3 per cent, which it had downgraded in March.
Expansion was mainly driven by the services and manufacturing sectors, particularly continuing demand for semiconductors and consumer products such as motor vehicles, BNM said.
Malaysia - which has seen some of the worst COVID-19 outbreaks in the region - lifted most of its coronavirus measures this month, as infection rates slowed amid a ramped up vaccination programme.
On Wednesday, the central bank unexpectedly raised its benchmark interest rate to 2.00 per cent from an historic low of 1.75 per cent, citing a firmer domestic growth path as well as inflationary pressures stemming from the Ukraine conflict and global supply chain disruptions.
"If positive growth trajectory continues and barring any unexpected shocks, it would be appropriate for the MPC (Monetary Policy Committee) to further reduce the degree of monetary accommodation," she said. Headline inflation was projected to average between 2.2 per cent - 3.2 per cent this year, unchanged from BNM'S earlier estimate.