KUALA LUMPUR, Jan 25 — Malaysia’s economy is likely to expand at a slower rate this year as the country gradually recovers from the policies and measures implemented during the lockdowns, an economist said.
Malaysia University of Science and Technology (MUST) professor Geoffrey Williams said that while the country would see economic growth, the figures would not be as optimistic as predicted by international forecasters due to a variety of factors, including the lockdown policies.
“It would probably be around 3.5 per cent because the lockdown policies have affected all aspects of the domestic economy, and we have seen the average and median wages falling,” he said.
Williams said this during the 2022 Malaysia Economic and Strategic Outlook Forum on the topic ‘State of the Nation: Understanding Opportunities and Risks in 2022 To Build Back Better’.
He also highlighted that domestic investments as a proportion of Malaysia’s gross domestic product growth had continued to decline — a trend that has been ongoing since 2016.
Meanwhile, consumer and household debts continued to rise while the Employees Provident Fund (EPF) accounts have been significantly depleted.
“These factors have a significant structural impact on the economy, and as such, we anticipate no significant economic rebound but rather a much more muted, tentative and fragile economy,” Williams said.
He went on to say that if there is an increase in Covid-19 Omicron variant cases and the government responds aggressively, Malaysia will face a repeat of 2020 when the country began the year with a positive and relatively high growth forecast, and ended the year with an economy adversely affected by Covid-19.
Commenting on the country’s inflation rate, Williams said that external factors, such as the price of oil and the impact of lockdowns, led to a significant increase in inflation in the early part of 2021.
“There is nothing that we can do about external factors that are beyond our control, however, the lockdowns have impacted supply chains, and this was partly due to various policies in terms of price controls and removal of price controls, which impacted headline inflation,” he said.
Nevertheless, he noted that excluding core inflation, the inflation level is modest, and expected the headline inflation to be on the decline.
“We expected inflation to be around 1.6 per cent, it may rise slowly, but it will be below two per cent by the end of 2022,” said Williams.
He added that, in terms of headline inflation, it would be volatile, but much lower than it was in 2020 and 2021.
“We expect it to normalise around two per cent,” he said.
Meanwhile, on the impact of Budget 2022, Williams emphasised the importance of establishing an independent fiscal institution in the country to help understand the impact of budgetary discussions from a forensic perspective, which would report directly to both the parliament and the people.