Economists upbeat on Malaysia’s 1Q GDP growth

The growth is mainly attributed to the reopening of the economy and the transition into the endemic phase


MALAYSIA’S economic activities are anticipated to strengthen further with the reopening of the economy and the transition into the endemic phase.

Malaysian Rating Corp Bhd chief economist Firdaos Rosli expects the country’s GDP in the first quarter of 2022 (1Q22) to be streets ahead of 1Q21.

“The 1Q22 will be somewhat better than 1Q21 on a year-on-year (YoY) basis as growth in 1Q21 was hampered by a massive spike in positive Covid-19 cases,” Firdaos said in a text-reply to The Malaysian Reserve (TMR).

Moody’s Analytics forecast the Malaysian economy to expand 1.1% quarter-on-quarter in March following a 6.6% expansion in the prior quarter.

“The gains from a robust external position have largely extended into the opening months of 2022.

“Also, a lift in private consumption after an easing of Covid-19 restrictions and policy shift towards living with the virus is likely to have supported March-quarter growth,” it said.

Bank Negara Malaysia (BNM) will announce the country’s 1Q GDP result this Friday.

Analysts have predicted that the 1Q GDP results will be better than the same corresponding period last year.

Besides, it is noted that BNM is expected to keep its benchmark policy rate steady at 1.75% at its May meeting.

Separately, Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid believes that the GDP growth for this year is premised on improving domestic demand and the external sector despite the disruption in the supply chain.

“Direct cash transfers programme, withdrawal retirement savings would also provide a short-term booster to consumer spending which forms more than half of our economy,” he told TMR.

He also foresees that the labour market will improve on the back of a reopening of the country’s economy.

“This would lead to livelier economic activities which then would translate into demand for new labour as businesses would need to cater for incoming volume,” he noted.

On the other hand, the Centre of Market Education CEO Dr Carmelo Ferlito expressed that GDP usually failed to ignore the eventual growth or decline of the country.

“For example, GDP grew in 2021 by 3.1% but that growth was mainly driven by government spending and private consumption — this means that growth is resting on very unstable pillars, being basically financed by household debt, government debt and inflation,” he told TMR.

Beyond the GDP figure, he opined that people should look at the micro-foundations behind it.

“We will be on the right path if private investments grow, while a closer look should be devoted to the savings dynamics which is not captured by the GDP,” he said.

On the labour market, Carmelo views that it will grow at a slower pace as the economy is on the path of normalisation after the post-lockdown rebound.

“This will be the moment to look more at underemployment rather than unemployment per se,” he further said.

In January 2022, the labour market condition improved further as employment increased by 2.9% YoY, the biggest gain since June 2021, according to a report by MIDF Research.

“Resumption of domestic spending and continuous upbeat momentum of external demand, as well as elevated commodity prices were among key supportive factors for the labour market recovery,” said MIDF.