BUSINESS

MALAYSIA TO RECORD 6.2 PCT GDP GROWTH THIS YEAR ON FASTER ECONOMIC RECOVERY - STANCHART

11/01/2022 03:20 PM

KUALA LUMPUR, Jan 11 -- The Malaysian economy is expected to see a much faster recovery pace this year, with Gross Domestic Product (GDP) growth recovering to 6.2 per cent from 3.5 per cent in 2021 driven by the successful vaccination programme, said Standard Chartered Bank (StanChart).

Chief economist for ASEAN and South Asia, Lee Wee Kok, said the bank sees the economy returning to a growth trend in 2022, with a high vaccination rate limiting the risk of severe lockdowns, barring the emergence of a very challenging variant.

"External demand has been a strong source of support for the economy this year. While a high base effect may weigh on 2022 growth readings and the emergence of new variants may be a setback, ultimately global reopening should sustain external demand.

"Meanwhile, domestic demand is likely to catch up," he said during the StanChart Global Research Briefing 2022: H1 2022 Global and Malaysia Outlook held virtually today.

As of the third quarter of 2021, household spending was still about 6.5 per cent below the level recorded in the fourth quarter of 2019.

"We expect private consumption to rise eight per cent year-on-year in 2022, supported by easing of mobility restrictions, improved job prospects and a better wage outlook.

"Investment activity should also pick up strongly with improved clarity on the domestic economic reopening and higher construction activity," he added.

On the fiscal policy, Lee said Budget 2022 remains expansionary, with spending -- excluding COVID-19 funds -- projected to increase 10 per cent.

"The fiscal deficit is projected to narrow to six per cent of GDP in 2022 from 6.5 per cent in 2021.

"Excluding COVID-19 funds, the deficit would be higher at 4.5 per cent in 2022, versus 3.9 per cent in 2021," he said.

Lee said the Federal Government’s revenue assumption for 2022 appears moderate, at 14.3 per cent of GDP.

"We see revenue rising due to better collection as growth recovers in 2022, as well as a one-off revenue from the windfall tax, which is estimated to raise approximately 0.4 per cent of GDP,” he said.

On the expenditure front, development spending was raised by 22 per cent in the 2022 budget to 4.6 per cent of GDP from 4.1 per cent.

"Fuel price caps could pose a risk of additional spending, but this should be mitigated by increased oil-related revenue.

"The budget debate is still in progress at the time of writing, but we expect limited opposition given that the main opposition bloc has broadly agreed to support the budget, or abstain from voting on it," he said.

-- BERNAMA


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