05/13/2022 | Press release | Distributed by Public on 05/13/2022 11:59
Malaysia's economy grew by 5% in the first quarter of 2022 (Q1 2022), supported by increases in both domestic and external demand, as well as labour market recovery. All of this was attributed to the Government's consistent policy support, particularly initiatives under an expansionary Budget 2022 which have been in full swing since the start of the year, as well as the spill over effect from Budget 2021 and previous stimulus and assistance packages.
Throughout Q1 2022, monthly GDP grew consistently at a rate of 4.3% in January, 5.2% in February, and 5.4% in March. Among the various economic indicators that have shown signs of improvement are:
For Malaysia's financial and capital markets,
MOVING FORWARD
The Malaysian economy is expected to maintain its recovery momentum in 2022. The transition to the endemic phase, as well as the reopening of international borders, will increase tourist arrivals and improve trade and business activities, resulting in a strong recovery in the services sector. Furthermore, the RM10,000 special withdrawal from the Employees' Provident Fund (EPF) and Bantuan Keluarga Malaysia (BKM) payments are expected to boost private consumption and help the economy recover further.
The expansionary 2022 Budget and the resumption of projects with high multiplier effects will help to sustain growth, which will be supported by implementation of development programmes under the 12th Malaysian Plan. Together with strong external demand from major trading partners, the economy is on track to meet the 5.3% to 6.3% GDP growth forecast in 2022.
Nonetheless, the Government is cautious of potential downside risks to growth posed by recent global events. Geopolitical tensions, for example, have caused economic pressures on multiple fronts, most notably an increase in global inflation as commodity prices continue to rise. According to the International Monetary Fund (IMF), inflation will rise by 5.7% in advanced economies and 8.7% in emerging market and developing economies. Malaysia's inflation is expected to range between 2.2% and 3.2% (2021: 2.5%) this year, in line with the IMF's forecast of 3.0%, the lowest amongst ASEAN countries.
If global developments continue to affect investment and global trade, supply chains will be impacted further, potentially disrupting Malaysia's economic recovery momentum, given that we are an open economy with total trade accounting for approximately 120% of GDP. Furthermore, the sharp rise in inflationary pressures, particularly in the US, has prompted several central banks to raise policy rates at a faster pace, potentially leading to tighter global financial conditions. Commodity and food price increases, as well as labour shortages, may limit Malaysia's growth potential.
Moving forward, the Government and relevant agencies will continue to monitor various economic risks and ensure that policy decisions effectively manage any external shocks that may affect the overall well-being of people and businesses. The Government's medium-term priority is to implement structural reforms that will boost the country's economic potential, resilience and prospects, as well as make Malaysia a more attractive investment destination. Overall, this will promote more sustainable and inclusive economic growth for all.
YB Tengku Datuk Seri Utama Zafrul Tengku Abdul Aziz
Minister of Finance
Putrajaya
13 May 2022
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