Malaysia outlines 3 priorities for long-term economic prospects

by AZREEN HANI / pic by TMR

THE key national priorities for improving Malaysia’s long-term economic prospects and resilience will be digitalisation, technological adoption and sustainability, says Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz (picture).

He said these will be pursued in tandem with the government’s commitment to medium-term structural reforms to attract higher-quality investments and create high-skilled, well-paying jobs.

“The government will resume its consolidation path gradually and strategically as the recovery becomes more firmly entrenched,” he said in a statement yesterday.

“This will balance short-term fiscal requirements with long-term fiscal and economic sustainability. As part of its reform initiatives to strengthen public finances by improving fiscal discipline, expenditure effectiveness, and transparency, the government is also working to enact the Fiscal Responsibility Act (FRA),” Tengku Zafrul added.

Expected to be tabled by the end of this year, the FRA will increase transparency and accountability in particular by publishing a tax expenditure statement, a midyear budget report, and a fiscal risk statement.

Tengku Zafrul said this in response to the S&P’s reaffirmation of Malaysia’s sovereign credit ratings at A- and revision of the outlook from ‘Negative’ to ‘Stable’.

The global rating agency foresees Malaysia’s GDP growth at +6.1% for 2022 and +5% for 2023. The steady growth momentum is supported by strong exports, high commodity prices and domestic demand following the reopening of the economy. 

The minister said this revised outlook reflects Malaysia’s effective Covid-19 policy response, which has enabled a strong economic recovery, as well as the country’s resilience amidst an uncertain and highly challenging global landscape.

“The government will continue to respond strategically, proactively and decisively — given an increasingly uncertain external environment and high global inflation which have also caused inflationary pressures domestically — to ensure the economy remains on a strong recovery trajectory,” he added.

Meanwhile, MIDF Research said in its note today that the 2022 forecast and optimistic view given by the global rating agency is in line with its outlook assessment which shows Malaysia’s economic growth to average at +6% on the back of a strong external sector, elevated commodity prices and robust domestic demand. 

“Even though there is food inflation spike risk, overall price pressure to remain stable amid current capped retail fuel prices for RON95 and Diesel. As long as average headline inflation does not surpass +3% year-on-year, we believe domestic spending to stay in an upward trajectory for this year and 2023,” the research firm stated.