By Nurunnasihah Ahmad Rashid and Kisho Kumari Sucedaram
KUALA LUMPUR, MAY 13 (Bernama) -- Analysts and economists remain confident of Malaysia’s economic prospects, suggesting that domestic demand and the private sector will be the key drivers of economic growth going forward.
This was following a rebound in the gross domestic product (GDP) growth data in the first quarter of 2022 (Q1 2022) to five per cent against a contraction of 0.5 per cent in Q1 2021, which was viewed as an optimistic sign for the country’s economic growth.
Socio Economic Research Centre Malaysia (SERC) executive director Lee Heng Guie said Malaysia’s economy grew beyond expectations by some economic analysts supported by recovering demand and a stronger labour market.
“This is a good number. The growth was also better than my projection of between 4.6 per cent and 4.8 per cent for the quarter under review,” he told Bernama.
He said the Malaysian economy was in the midst of adjusting itself to the current economic situation and the second quarter is believed to fare much better with a figure to be closer to six per cent.
“However, I would caution on second half of 2022 (2H 2022) due to factors such as ongoing war, increase in business costs, higher inflation, a strict lockdown in China to stem the COVID-19 outbreak as well as prolonged supply chain disruptions,” he said.
Lee said the fundamentals are still intact but the global headwinds are limiting overall growth performance.
“Nevertheless, domestic demand is still going to drive the growth in the next quarter and beyond,” he added.
Bank Islam chief economist Dr Mohd Afzanizam Abdul Rashid said further reopening of the economy has been instrumental in contributing toward the domestic economy as households and businesses are freer to transact which could be GDP accretive.
”The way we see it, the GDP growth projection of between 5.3 per cent and 6.3 per cent for 2022 is within the reach,” he told Bernama.
Overall, he said the Q1 2022 GDP came in higher than expected and the main sources of growth were domestic demands, namely the consumption and investment.
Furthermore, Mohd Afzanizam said higher growth of five per cent explained the reason for the rise in the overnight policy rate (OPR) by 25 basis points recently by Bank Negara Malaysia (BNM).
Moving forward, he said he foresaw further increase in OPR as the recovery became more sustainable.
Meanwhile, OCBC Treasury Research and Strategy economist Wellian Wiranto said the robust GDP print is in line with the tightening stance that BNM has just adopted this week.
“It has not shifted our thinking that it may still opt for a pause in the July meeting and only hike again in September in view of its pledge to tighten in a ‘measured and gradual’ way,” he said.
Overall, he said the uptick in domestic demand, together with signs that the labour market and wages are recovering, would have undoubtedly contributed to BNM’s rate hike decision, especially to its expectation that the underlying core inflation may pick up to a range of two per cent to three per cent.
At the announcement of Malaysia’s Q1 2022 gross domestic product (GDP) performance earlier today, BNM governor Tan Sri Nor Shamsiah Mohd Yunus stressed the importance of recalibrating the monetary policy to avoid the need to be aggressive in raising interest rates.
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