Malaysia unlikely to enter recession

The economic resilience is mainly due to Malaysia has developed a diversified economic structure and become less dependent on commodities

by NURUL SUHAIDI / Pic by BERNAMA

MALAYSIA is unlikely to get into recession despite the high inflationary pressure globally, said Bursa Malaysia chairman Tan Sri Abdul Wahid Omar (picture).

The inflationary pressure is forcing central banks to tighten monetary policy that could cause an economic slowdown in some countries, he said.

Malaysia, however, benefits from a series of pragmatic and responsive policies, and has developed economic resilience due to its diversified economic structure and is less dependent on commodities.

“Like other countries, Malaysia was also impacted by trade tension, supply chain disruption and war — which led to the skyrocket of commodity price and logistics cost.

“However, in the second quarter of 2022, the country’s economy expanded strongly by 8.9% – the highest in the region – bringing the first half 2022 GDP growth to 6.9%,” he said during a conference by Invest Malaysia titled “Pivoting for The Future” at Bursa Malaysia today.

“Based on 2021 data, the agriculture and mining sectors now contribute only 14% to Malaysia’s GDP, with the services sector contributing 57% and manufacturing sector contributing 24.3% to GDP,” he said.

Abdul Wahid highlighted another key factor contributing to Malaysia’s resilience, which is the strength and stability of the financial system.

Malaysian banks are well capitalised with a healthy 2021 Common Equity Tier 1 capital ratio of 15.2% liquid, better managed and effectively regulated and supervised by Bank Negara Malaysia.

“Banks also continue to fulfil their intermediation role by mobilising surplus funds to channel the productive sectors of the economy,” he added.

He pointed out that Malaysia is also home to the largest Islamic capital markets in the world, with a combined value of RM2.3 trillion, or about two-thirds of all capital markets.

On the sustainability aspect, he urges corporates to adhere to sustainability and environmental, social and corporate governance (ESG) efforts as part of fulfilling the global commitment to sustainability as we pivot in the future.

“Bursa Malaysia will continue to play a key role in driving good ESG practices and disclosures across all listed companies according to the sustainability framework,” he said.

Meanwhile, Bank Negara assistant governor Fraziali Ismail, one of the panellists during the forum said Malaysia also is set to benefit from the changing landscape of Global Value Chains which are currently evolving.

“We have comparative advantage and enabling ecosystem in the electric and electronic sector allow us to capitalise on the opportunities for a sustainable future,” he said.

However, Fraziali said Malaysia also confront with sets of challenges that may deter progress such as brain drain, increasing an ageing population, depleting savings among the public, gap in social protection and income growth among the employee.

“For the post-pandemic, priority is to shift to longer-term policies to secure a sustainable and inclusive growth,” he said.

Similarly, Socio-Economic Research Centre ED Lee Heng Guie noted Malaysia must reflect strong courage to reform in order to deliver a more inclusive, resilient and sustainable future.

“Reform needs a strong ownership and the political institutions to guide credible economic policymaking, resolve social conflicts and more engagements with the business community and civil society,” Lee added.

Lee said reformation will promote both domestic and foreign investment, boost investor confidence, and increase competitiveness, as well as economic and productivity growth.

“Therefore, it is critical that the next generation of leaders not only step up to the plate but bring a fresh perspective that serves to change the game,” Abdul Wahid concluded.