MALAYSIA’s immediate priority is to moderate the impact of inflation and enhance a conducive investment climate that will shore up both domestic and foreign investment, an economist said.
SERC Sdn Bhd executive director Lee Heng Guie told FocusM that this was in anticipation of weaker economic prospects for Malaysia in 2023 due to moderating exports and the normalisation of domestic demand after the robust pent-up consumer spending in 2022.
Lee said that the move of not raising the electricity tariffs for the households and SMEs is seen as positive to provide relief to the households and businesses.
On some of the potential global risks, Lee added that the global recession-lagged impact of higher interest rates, as well as continued inflation, would weigh on the US economy and Europe, which is expected to be in recession in 2023.
He pointed out that the external headwinds would slow its export engine and the strength of the domestic demand will be dampened by inflation and higher cost of living.
According to Lee, the Malaysian economy cannot be completely insulated from the external environment as the headwinds will transmit onto the domestic via trade and financial channels.
“What the Government can help is to mitigate the external spill-over impact via strengthening economic and financial resilience to support domestic demand and business spending.
“The Government needs to ensure the retailing of the Budget 2023 is approved and quickly implement and disburse money for the projects and programs – short-term multiplier projects.”
RAM Ratings projected Malaysia’s gross domestic product (GDP) growth to slow to between 4% and 5% in 2023, from an estimated 8.2% in 2022. The rating agency said the global economic slowdown is anticipated to dampen Malaysia’s exports, while the still-notable price pressures and tighter monetary conditions might impact domestic consumption.
Meanwhile, a senior economist in a bank-based broking house said that because of the impending global headwinds, Malaysia needs to ensure that it tackles the cost-of-living issue urgently and ensure that measures are taken to bolster consumer demand.
“This was imperative since tepid exports were expected and Malaysia needs to ensure that domestic demand and domestic investment would be the engine of growth.
“Paramount to this was political stability, and the new government must continue to provide an investor-friendly environment to shore up foreign investment into the country,” added the economist. — Dec 18, 2022
