RAM Rating Services Bhd (RAM Ratings) projects Malaysia’s economic growth to reach 6.8% for 2022 from an estimated 3.8% in 2021 as the economy stages a rebound on most fronts, riding the positive momentum of the country’s high vaccination coverage and ongoing vaccine booster rollout.
In its Economic Outlook 2022 report, the credit rating agency said the resumption of most economic activities without the risk of further nationwide lockdowns is a key risk driver of its forecasts.
“The recent emergence of the Omicron variant, while posing a potential threat, could delay recovery but not completely derail it. The reimposition of nationwide lockdowns is not within our current base case scenario.
“Low base effects will visually prop up year-on-year GDP growth in 2022 but output in absolute terms is still below potential, anticipated to be only circa 4.6% above 2019’s output. Negative output gap is expected to persist in 2022, albeit narrower than the past two years,” it said.
The Ministry of Finance expects the GDP to expand between 3% and 4% in 2021 and between 5.5% and 6.5% in 2022, supported by a significant improvement in global trade, stabilised commodity prices, containment of the pandemic and gradual improvement in consumer and business sentiments. RAM Ratings estimates a fiscal deficit of 5.9% of GDP in 2022, in line with the government’s projection of 6% under Budget 2022 and down from the latter’s 6.5% estimate for 2021.
“Better growth prospects and significant gains from one-off and adjusted tax policies are upsides to the budget, despite the higher budget allocation for 2022.
“Fiscal space remains fairly tight, with government debt projected to amount to RM1.1 trillion in 2022 (or 65% of GDP) and the debt servicing burden significant at 17.2% of total projected revenues for the year (2021: 17.6%),” it added.
MIDF Amanah Investment Bank Bhd (MIDF Research) expects Malaysia’s economy to grow 3.7% this year and further expand to 6% in 2022 amid the recovery in economic activities.
“The recovery in domestic economic activities will continue as both consumers and businesses increase their spending due to the better outlook.
“Better investment activity and stable inflation, coupled with continued growth in external demand, especially for electrical and electronic and commodities, will also lend support to growth next year,” MIDF Research economist Abdul Mui’zz Morhalim told a media briefing on 2022 MIDF Market Outlook on Tuesday.
Source: https://themalaysianreserve.com/2021/12/09/malaysian-economy-on-stronger-recovery-path/