PETALING JAYA: Despite a statistical improvement going into the second half of 2022 (H2 2022), economists have expressed concern that the overall performance of the Malaysian economy will remain dull.
Malaysia’s gross domestic product (GDP) is expected to grow around 4.5% in H2 2022, down from 5% in Q1 and an estimated 8% in Q2.
Bank Islam Malaysia chief economist Afzanizam Abdul Rashid told FMT Business the economy is likely to grow about 5.5% year-on-year.
He said the Purchasing Managers’ Index (PMI) was a useful barometer to gauge the country’s overall economic performance.
Last month, the seasonally adjusted S&P Global Malaysia Manufacturing PMI was reported to have fallen from 51.6 in April to 50.1 in May.
“Although the PMI is trending downwards, its momentum appears to have waned,” Afzanizam said. “In any case, what matters most is that we are still in positive territory.”
He said on-going supply chain disruptions, predominantly caused by lockdowns in China, coupled with rising prices of commodities and domestic inflation, have hampered growth.
“These will have a negative impact on our third-quarter performance, but we will likely see growth nonetheless,” he said.
“Moving into Q4 2022 and Q1 2023, we expect the GDP to remain in positive territory, but it may lack momentum.”
Center for Market Education CEO Carmelo Ferlito cautioned against being too fixated on the need to shore up the GDP.
Malaysia’s positive growth in 2021 was driven mainly by government expenditure and private consumption, which created more government and private debt and has led to inflation, he said.
Such growth was unsustainable, he said, adding that all things being equal, he would have been happy with reduced government spending even if it resulted in negative growth.
Ferlito said the key elements for sustainable growth were savings and private investments, but he was unable to see a rising trend in either.
“The government keeps on spending, which means more debt and inflation are being created, which places the country on a dangerous path,” he said.
Ferlito expects the country’s GDP to fall in Q2 2022.
“This is unavoidable due to the government’s failure to implement adequate initiatives to tackle inflation,” he said.
According to the department of statistics Malaysia, the economy expanded 5% in Q1 2022, accelerating from 3.6% in Q4 2021, beating market consensus of a 4% rise.
Its report said the performance of the economy was supported by an improvement in domestic demand as economic activity continued to normalise following the easing of Covid-19 restrictions.
In May, Bank Negara Malaysia said the country was on track to achieve between 5.3% and 6.3% GDP growth for 2022.
Inflation was projected to average between 2.2% and 3.2% (compared with 2.5% in 2021), the lowest in Asean, in line with the International Monetary Fund’s forecast of 3.0%.
Source: https://www.freemalaysiatoday.com/category/highlight/2022/07/04/analysts-expect-gdp-growth-to-wane-in-the-next-six-months/