KUALA LUMPUR – Malaysia’s economy is set for a gradual recovery from the COVID-19 downturn, with real gross domestic product (GDP) growth at 3.1 per cent in 2021 and projected to accelerate to about 5.75 per cent in 2022, according to the preliminary findings of an International Monetary Fund (IMF) team.
The team, led by Lamin Leigh, reported that the growth would be supported by the authorities’ impressive vaccine rollout and swift implementation of economic policy support measures.
“A more severe downturn (in 2021) was averted, thanks to the swift, substantial, and multi-pronged pandemic policy response targeted to support affected households and businesses.
“Growth in 2022 is projected at about 5.75 per cent, driven by pent-up domestic demand and continued strong external demand,” he said in a statement today.
Lamin said the pandemic crisis is set to leave implications that could linger over the medium to long run, citing the recovery would likely be uneven, with output remaining well below its potential level.
He said the team recommended additional near-term targeted fiscal support towards vulnerable and hard-hit segments of the economy and productive investments.
“In the near term, fiscal policy should continue to be nimble and increasingly targeted, with a focus on further buttressing the recovery, minimising economic scarring, protecting the vulnerable segments of the population, and scaling up productive investments, in line with the authorities’ spending priorities.
“A credible, specific, growth-friendly, and clearly communicated consolidation strategy should be implemented once the recovery is entrenched to rebuild fiscal buffers, preserve fiscal sustainability, and reduce fiscal risks, supported by robust fiscal governance practices,” he said.
The findings also included that the accommodative monetary policy stance is appropriate and the financial sector support measures should continue to be more targeted and unwound as the recovery becomes entrenched.
“Coordinated and targeted structural reform policies would help address long-standing structural challenges, limit economic scarring, boost productivity, and address inequality and meet the aspiration of a ‘Prosperous, Inclusive and Sustainable Malaysia’,” Lamin added.
IMF said the views of the findings do not necessarily represent the views of its executive board.
A report based on the preliminary findings would be prepared by the team and expects to present it to the executive board in April 2022, it added.