THE Malaysian economy posted a positive growth of 5.0% in 1Q 2022 (4Q 2021: 3.6%), mainly supported by improving domestic demand as economic activity continued to normalise with the easing of containment measures.
According to Bank Negara Malaysia (BNM), the improvement also reflects the recovery in the job market with unemployment rate declining further to 4.1% (4Q 2021: 4.3%) as well as continued policy support.
“Strong external demand amid the continued upcycle in global technology provided further lift to growth,” the central bank pointed out in a media statement.
“On the supply side, services and manufacturing sectors continued to drive economic growth, expanding by 6.5% and 6.6% respectively. On a quarter-on-quarter seasonally-adjusted basis, the economy grew by 3.9% (4Q 2021: 4.6%).”
Headline inflation moderated to 2.2% during the quarter (4Q 2021: 3.2%). This mainly reflects the smaller contribution from the dissipating base effect from lower domestic retail fuel prices last year, and the absence of the base effect from electricity tariff rebates implemented in 2020.
Meanwhile, core inflation increased to 1.7% during the quarter (4Q 2021: 0.8%). This reflects price adjustments amid the higher costs and improving demand conditions with price increases being more noticeable specifically for food items due to supply-related factors such as higher global commodity prices.
On the foreign exchange front, the ringgit depreciated by 0.7% against the greenback in 1Q 2022 (YTD as of May 11: -4.7%), broadly in line with the movement of regional currencies (1Q 2022: -0.8%; YTD: -3.4%).
“This was due to the broad US dollar strength, driven by higher US interest rates, global risk-off sentiment given the conflict in Ukraine and expectations of modest growth in China,” justified BNM.
“High commodity prices and Malaysia’s recovery prospects had also cushioned the downward pressure on the ringgit from these external factors.”
Going forward, while domestic financial markets are subject to periods of high volatility, the central bank expects spill-overs to domestic financial intermediation to be contained. “Malaysia’s strong external position and resilient banking system (will) enable the economy to withstand external shocks,” it noted.
Commenting on the outlook for 2022, BNM’s Governor Tan Sri Nor Shamsiah said Malaysia’s domestic economy is expected to improve further this year with growth projected at 5.3% to 6.3% as announced in March.
“This is underpinned by stronger domestic demand, continued expansion in external demand, and further improvement in the labour market,” she pointed out. “Growth would also benefit from the easing of restrictions, re-opening of international borders and implementation of investment projects”.
Nevertheless, risks to Malaysia’s growth momentum remain. These include a weaker-than-expected global growth, further escalation of geopolitical conflicts, worsening supply chain disruptions, adverse developments surrounding COVID-19 and heightened financial market volatility. – May 13, 2022
