KUALA LUMPUR, March 29 — The Malaysian economy is projected to grow between 4.0 per cent and 5.0 per cent in 2023, supported by firm domestic demand amidst challenges rising from slowing global growth, said Bank Negara Malaysia (BNM).
In its Economic and Monetary Review 2022 report, the central bank said continued concerns about the elevated cost of living and input costs, as well as their impact on the behaviour of households and businesses, would add to the challenges.
“Nonetheless, further improvement in labour market conditions, continued implementation of multi-year investment projects and higher tourism activity — particularly with the resumption of China’s outbound tourism — are expected to support private consumption and investment growth,” it said.
In 2022, Malaysia’s gross domestic product (GDP) recorded a moderate growth of 8.7 per cent against the backdrop of full upliftment of Covid-19 containment measures, resilient growth in exports, particularly commodity exports, the revival of tourism activity and continued policy support.
BNM said in tandem with a more subdued global trade activity, as similarly observed in other economies, gross exports are expected to expand modestly at 1.5 per cent in 2023, while gross import would likely slow down to 1.1 per cent in 2023.
It said further recovery in inbound tourism and moderation in import growth would continue to provide support to net export growth.
The central bank said it expected to grow at a moderate pace of 6.1 per cent in 2023 compared with 11.3 per cent in 2022, while private investment would be at 5.8 per cent against 7.2 per cent previously.
It said public consumption is expected to grow slower at 1.3 per cent in 2023 against 3.9 per cent in 2022, while public investment would be at 7.0 per cent in 2023 (5.3 per cent in 2022).
Sectorial, BNM said most economic sectors are projected to expand at a more moderate pace in 2023 amid the expectation of slower global growth and normalisation from the high growth recorded last year.
“Broadly, growth would be driven by continued expansion in consumer and tourism-related subsectors while export-oriented subsectors are expected to moderate in line with slower global growth.
“Meanwhile, the easing of supply chain disruption and resolution of labour shortages will also lend support to all economic activities,” it said.
BNM said the services sector is expected to grow 5.0 per cent in 2023, followed by manufacturing (4.0 per cent), agriculture (0.7 per cent), construction (6.3 per cent) and mining and quarrying (2.0 per cent).
On risks to Malaysia’s growth projection, it said they would be fairly balanced.
It said the downside risks emanated primarily from external factors, mainly from weaker-than-expected global growth stemming from a sharp tightening in global financial markets amid tighter monetary policy or worsening sentiments.
“Additionally, further escalation of geopolitical conflicts could dampen Malaysia’s trade performance,” it said.
On the domestic front, BNM said higher-than-expected inflation would lower the purchasing power of households, while a steep rise in input costs could affect firms’ profits.
Regardless, better-than-expected labour market conditions, stronger pick-up in tourism activity, as well as the implementation of projects, including from the recently re-tabled Budget 2023, would provide upside risks to the domestic growth outlook, it added.
BNM said the headline and core inflation are projected to average between 2.8 per cent and 3.8 per cent in 2023.
On the current account, the central bank said it was expected to register a continued surplus of between 2.5 and 3.5 per cent of GDP in 2023, driven by continued goods surplus and lower deficit in the services account.
Meanwhile, in the central bank’s Annual Report 2022, BNM Governor Tan Sri Nor Shamsiah Mohd Yunus said the central bank has remained focused in its policy response on managing risks that could undermine the economy’s long-term health and the well-being of the people.
She said the bank also continued to ensure that the financial sector remains a source of strength for the Malaysian economy.
“Strong capital and liquidity buffers have enabled banks to continue lending to the economy while extending help to borrowers who are still struggling.
“These buffers have remained critical to preserving banks’ resilience, as well as public and investor confidence, including during the most recent episodes of banking stress experienced in some advanced economies,” she said.
Nor Shamsiah said with the pandemic receding further into the rear-view mirror, the country needed to stay the course in implementing reforms that would allow it to secure its future.