KUALA LUMPUR, March 19 (Bernama) -- Malaysia’s stronger ringgit is helping to ease the impact of rising global import prices, although the country’s import cover has declined, compared with pre-COVID 19 pandemic levels, said the World Bank's lead economist for Malaysia, Dr Apurva Sanghi.
In a post on his X account (@ApurvaSanghi), he compared the country's economy preparedness to weather the current Middle East war shock against the eve of COVID-19 shocks. Malaysia reported its first COVID-19 positive case on Jan 25, 2020.
Explaining further, Sanghi said Malaysia’s macro position is broadly stronger now than during the eve of the pandemic, with most key indicators healthier.
He said Malaysia’s gross domestic product (GDP) growth has risen to 5.2 per cent in 2025 from 4.4 per cent in 2019, while real GDP per capita increased to RM48,200 from RM42,500 previously.
"The labour market is also signalling near full employment, with unemployment currently below three per cent, compared with 3.3 per cent before the pandemic,” he said.
However, several indicators have weakened relative to the pre-COVID period, including inflation, fiscal balance, debt levels and import cover.
Inflation stood at 1.6 per cent currently versus 0.7 per cent in 2019, while the fiscal deficit has widened slightly to 3.8 per cent of GDP from 3.4 per cent previously, he said, while government debt has also increased to 64.7 per cent of GDP from 52.4 per cent.
Meanwhile, import cover, a key measure of external resilience, has declined to 5.8 months compared with 7.5 months prior to the pandemic.
On inflation, Sanghi said price pressures remain manageable despite stronger growth, reflecting a stable inflation-growth dynamic. However, he noted that uncertainty over inflation expectations could influence the outlook.
On fiscal conditions, he said it is a bit higher now compared to pre-COVID.
"From the pandemic high of six per cent of GDP, the downward trending of the fiscal deficit is encouraging (reflecting subsidy reforms and fiscal consolidation)," he said.
High debt per GDP is a concern, he said, saying that the rising debt interest payments will take up a larger share of government revenue which translates to less room for stimulus if it comes down to that.
Sanghi said Malaysia’s economic structure, characterised by a diversified mix of commodities and manufacturing, a flexible exchange rate, and a stable financial system continues to support resilience against external shocks.
Nevertheless, he highlighted several near-term risks, particularly Malaysia’s exposure as a highly open, price-taking economy to global supply chain disruptions, especially in fuel, food and fertilisers.
“A strong ringgit offers some respite against higher import prices, although import cover is lower today than on the eve of COVID-19,” he said.
He added that persistently high energy prices could affect investment momentum, including in energy-intensive sectors such as artificial intelligence infrastructure.
Sanghi also cautioned that tourism, which was a key growth driver in 2025 and contributed to Malaysia’s first services trade surplus in 13 years, may soften due to rising travel costs, particularly jet fuel prices.
On fiscal policy, he said Malaysia’s position, while not weak, may require further adjustments, including a review of fuel subsidies.
"To what extent will the government absorb costs through subsidies versus passing them on to consumers remains a key policy consideration,” he said, adding that any fuel price adjustments should be implemented gradually to avoid wider economic repercussions.
Overall, Sanghi said Malaysia is entering the current period of uncertainty from a position of relative strength, albeit with narrower fiscal space.
He added that while economic downturns in Malaysia tend to be sharp due to its openness, recoveries are typically swift.
"It’s impossible to say how and when the current uncertainty will be resolved.
"Not panic but preparation, and not only by the government but also by the rakyat is what’s called for," he added.
On Feb 28, Israel together with the US, launched a military operation against Iran, which was later met with retaliatory strikes by Iran against Israel and several US interests in the Gulf countries.
-- BERNAMA
