BNM maintains GDP growth forecast of 5.3% to 6.3% for 2022

This is as the Malaysian economy is projected to continue to recover going forward albeit at a more moderate pace amid global headwinds


BANK Negara Malaysia (BNM) is maintaining its GDP growth projection at 5.3% to 6.3% for this year, even after taking into account the slower global growth.

BNM Governor Tan Sri Nor Shamsiah Mohd Yunus said given the strength in the first half of 2022, the Malaysian economy is projected to continue to recover going forward albeit at a more moderate pace amid global headwinds.

She added that growth for the rest of the year and 2023 would be driven mainly by private sector expenditure, particularly as tourism sectors normalise towards pre-Covid levels. 

“Investment activity stands to benefit from the realisation of multi-year projects such as the MyDigital, East Coast Rail Link and the Light Rail Transit Line 3.

“Supply chains are also expected to ease as receding Covid-related disruptions and slowing global trade alleviate some of the pressures going forward.

“These would offset the expected moderation in global growth,” she said during the second quarter of 2022 (2Q22) GDP announcement in Kuala Lumpur today.

Commenting further, Nor Shamsiah said the domestic economy would be supported by the improving labour market, which has shown continued improvements in tandem with stronger economic activity.

She noted that the improvement in the 2Q was supported by robust employment growth as jobless claims fell significantly and rehiring of retrenched workers remained relatively strong. 

Additionally, she said high frequency data from the Social Security Organisation indicated a continued decline in layoffs and relatively strong hiring activity in 2Q22.

On a year-on-year basis, Nor Shamsiah said private sector nominal wages improved in line with economic activity, recording a higher growth of 7.8% in 2Q.

She added that this was partly supported by the minimum wage hike and driven by expansion in both the services and manufacturing sector wages.

“Going forward, continued expansion in economic activity is expected to lead to a broader recovery in the labour market. 

“Hiring intentions were strong with higher job creation in the second quarter. This is key in supporting the domestic economy,” she said.

Meanwhile, on the external front, Nor Shamsiah said global growth would be weaker than earlier forecast due to higher inflation, more severe impact of lockdowns in China and tighter monetary policy.

She said being a small and open economy, this slowdown would have an impact on the country’s exports.

The governor said nevertheless, Malaysia’s diversified exports structure across products and markets will be helpful in facing potential shocks in demand for any specific products or from any specific countries.

Nor Shamsiah also highlighted that recent data shows Malaysia’s gross exports continued to register double-digit growth, supported by higher demand for electrical and electronics (E&E) products, as well as firms’ adaptability to mitigate supply chain disruptions. 

She said higher commodity prices provided a further impetus to Malaysia’s exports.

“Going forward, demand for E&E products is expected to remain firm, in-line with industry projections in 2022 and 2023. 

“Our engagements with the industry also affirm that firms have been taking proactive mitigation measures to minimise the impact from the supply chain disruptions. 

“This includes building of buffer inventories as reflected in the strong intermediate import growth for the quarter,” she noted.

On the external front, Nor Shamsiah says global growth will be weaker than earlier forecast due to higher inflation, more severe impact of lockdowns in China and tighter monetary policy – pic BERNAMA 

Moving forward, Nor Shamsiah pointed out that the growth outlook continues to face challenges and on the global front, a more severe deceleration in global growth is a key downside risk factor.

She said this could stem from multiple factors, including over tightening of monetary policy in the US, energy crisis in the Euro area and renewed lockdowns in China.

She also added that supply chain disruptions could worsen, with further increase in global commodity prices, if geopolitical conflict escalates and the supply conditions could be further exacerbated by more acute labour shortages or adverse weather conditions.

“Stronger cost and price pressures could dampen household spending and investment activity, weighing on the economic recovery. 

“These outweigh upside risks from a stronger labour market, rapid improvement in tourism, and any additional domestic policy measures,” she said.

On that note, Nor Shamsiah described the ongoing inflation as a global phenomenon, and it is largely dependent on the international scene.

She noted that in the past quarter, inflation has risen in many countries. 

“Notably, the higher inflation continued to largely reflect elevated commodity prices due to the ongoing conflict in Ukraine. 

“In some countries such as the US and UK, their tight labour market conditions and strong demand also added to their inflationary pressures,” she said.