KUALA LUMPUR, Feb 11 — Malaysia’s economic activities had improved in 2021, leading to a gradual decline in the unemployment rate, but the country is still not out of the woods yet, said Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid.
He noted that currently, the unemployment rate is still high at 4.3 per cent, though this is likely to taper to about 3.0 per cent to 3.3 per cent this year.
“So there is still some slack in the economy, therefore, the expansionary fiscal policy can be effective to address the gap,” he told Bernama today.
Mohd Afzanizam said fiscal deficits have been quite decent at 6.4 per cent of gross domestic product (GDP) in 2021, slightly lower from the initial estimates of 6.5 per cent during the tabling of Budget 2022.
“The elevated crude oil prices will give added space for fiscal policy to remain expansionary this year,” he noted.
Malaysia’s economy rebounded by 3.6 per cent in the fourth quarter of 2021 (Q4 2021), driven by higher external demand, while the full-year GDP stood at 3.1 per cent compared to a decline of 5.6 per cent in 2020.
Mohd Afzanizam said that the further reopening of the economy is certainly the key assumption for better growth this year, including the opening of international borders.
“This will revitalise economic activities and bring down the unemployment rate even further,” he said, adding that the number of job vacancies was at about 2.5 million versus 700,000 unemployed individuals last year.
Therefore, he said the case for lower unemployment is strong, thus providing the right impetus to growth this year and beyond.
“Having said that, downside risks are still visible. It may come from slower global growth, supply chain disruptions and the emergence of new COVID-19 variants that are immune to the present vaccines,” he said.
On inflation, Mohd Afzanizam said the cost of living would remain elevated with the inflation rate forecast to be at 2.3 per cent in 2022.
“Prices are progressively rising, but, from a long term perspective, the consumer price index is still within expectation as the inflation rate averaged at 2.4 per cent per annum between 1985 and 2021.
“Generally speaking, the rise in prices is still reasonable,” he added.
In 2021, the average headline inflation stood at 2.5 per cent against -1.2 per cent in 2020, while core inflation averaged at 0.7 per cent versus 1.1 per cent in 2020.
— Bernama
