MALAYSIA’S economy will improve this year if the Covid-19 epidemic is kept under control and without any further surprise of new variants, economists said.

Improvement, however, will only mean a better performance over 2020 and 2021, which saw several rounds of lockdown, they cautioned.

Malaysia-China Chamber of Commerce vice-president Kerk Loong Sing had predicted 2021 to be better than the year before but did not expect the Omicron variant of Covid-19 to emerge.

“With countries such as the United States as well as Europe suffering a setback, we are also affected because ours is an open economy,” he said.

Kerk said despite this, China – another major trading partner – has controlled the Covid-19 situation well.

“There were sporadic cases in China and the most serious issue is the recent lockdown of Xi’an city, which shows that China is still very strict and cautious in controlling the epidemic,” he said.

“As long as there is no outbreak of new variants and the epidemic is under control, China can move towards a better situation in the new year, which, in turn, will drive Asean countries, including Malaysia.”

Daily Covid-19 cases may remain high but under control, and with milder infections due to widespread vaccination, there need not be lockdowns and economic activities can continue, he said.

In the last three months of 2021, Malaysia’s daily Covid-19 cases have gone from around 5,000 to 3,000. More than 78% of the country’s population is fully vaccinated.

Asia Business Centre’s head of tax and financial consulting Chua Tia Guan is also cautiously optimistic about the economy this year.

People are still worried and cautious about spending, he said.

This year’s growth is projected at 5.5-5.6% by Putrajaya and 5.8% by the World Bank.

Chua said some of the challenges that may hinder efforts to achieve these targets are problems with the global supply chain, causing the prices of raw materials to increase, higher freight charges and labour shortages.

“Most companies, especially manufacturers, are facing a 20% shortage of employees,” he said.

“The increase in crude oil prices has also caused fuel and transport costs to go up.

“If the ringgit continues to depreciate, it will also make imported goods more expensive.”

He also highlighted the need for political stability, given the turmoil of the past two years, otherwise investors will continue their wait-and-see approach, which will not benefit Malaysia.

Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) treasurer-general Koong Lin Loong said 2022 should be looked at in two parts.

The first half of the year will see companies still exercising caution as they face rising costs of raw materials and labour shortages.

“They will be expecting lower profits. Moreover, bank loans for small and medium enterprises (SMEs) are almost exhausted, and reserves are also used up,” he said.

“These factors ushered in the New Year, which will not result in a V-shaped recovery for the first half of the year.”

For the second half of the year, Koong said much will depend on Omicron and if other new variants emerge.

He prefers to reserve judgement until the fourth quarter of 2022, or even 2023, when a better observation of overall economic recovery can be made.

“We’re still not seeing plans for Malaysia to open its borders (to all travellers like before) within the first quarter of 2022. How will this help us since we are an open economy?

“So any improvement will only be a slight one over how things were during the lockdowns. We do not expect a return to the same vigour before the epidemic, at least not until 2023,” said Koong, who is also ACCCIM SMEs committee chairman.

He said the economic stimulus packages extended by the last three governments since the epidemic struck the country have helped prevent a worse situation.

Although there are company closures, Koong said he would not call it a “wave of closures”.

“Measures by the government have helped with cash flow somewhat,” he added. – January 1, 2022.