THE GDP is expected to further grow, to between 5.3 and 6.3% this year, up from 3.1% last year.

Growth would be underpinned by the continued expansion in external demand, lifting of containment measures, reopening of international borders, and further improvement in labour market conditions, Bank Negara Malaysia (BNM) said.

“In addition, the implementation of investment projects and targeted policy measures will provide further support to economic activity and aggregate demand,” the central bank said in its Economic and Monetary Review 2021 report released today.

The bank said a stronger private sector recovery, supported by labour market improvements would be the main growth driver in 2022.

The unemployment rate expected to decline to 4%

The central bank said as economic activity picks up, the unemployment rate is expected to decline further this year to around 4% of the labour force, supported by targeted measures to boost labour demand, facilitate reskilling and upskilling, and reduce labour market frictions.

It said a sustained recovery in employment and income is expected to drive an improvement in household spending, while progress in vaccinations and the easing of containment measures would lead to an improvement in consumer confidence and some materialisation of pent-up demand.

“As a result, private consumption is expected to surge 9% while private investment is also expected to recover, increasing 5.3% supported by the continued expansion in global demand and the implementation of new and on-going investment projects,” it said.

On public investment, BNM said it is projected to expand 9.6% this year against a contraction of 11.4% last year, driven by continued capital spending by both the government and public corporations.

BNM said all economic sectors are projected to expand this year, with the export-oriented sectors continuing to benefit from strong external demand and expansion in domestic production capacity.

It said the services sector is expected to see the highest growth of 6.9% from 1.9%  last year, followed by construction (6.1% from -5.2%), manufacturing (5.2% from 9.5%), mining and quarrying (2.5% from 0.7%) and agriculture (1.5% from -0.2%).

Exports are expected to grow 10.9% and imports to expand 8.1%

The central bank said global demand would continue to support the external sector, with gross exports projected to grow 10.9% from 26% last year.

It added that gross imports are expected to expand 8.1% from 23.3% last year reflecting in part the demand for manufactured exports.

“Being an open economy, Malaysia will, however, be affected by the impact of the military conflict in Ukraine on global growth, mainly through the trade channel.

“Nevertheless, the corresponding increase in global commodity prices are expected to provide support to commodity exports and some lift to nominal incomes,” it said.

Structural reforms needed to address critical challenge

In her foreword, BNM governor Nor Shamsiah Mohd Yunus said 2022 is set to be a watershed year as most countries progressively transition towards endemic management of Covid-19.

She said the pace of recovery in Malaysia is projected to gather further momentum amid the reopening of the economy and international borders.

“While we are not yet out of the woods, we are better prepared now,” she said.

Going forward, she said well-executed structural reforms are needed to address the critical challenge of reinvigorating growth opportunities and strengthening the country’s economic fundamentals.

“I firmly believe that the Malaysian economy would be able to continue to prosper, and our prospects remain highly contingent upon our policy actions today. – Bernama, March 30, 2022.