Malaysia's prospects in 2022: Five things to keep an eye on

[ASEAN NOW Content Team]

 

After declining 4.5 percent in the third quarter of 2021, the Malaysian economy is currently climbing out of its bottom two years after the Covid-19 outbreak began.
It is on the road to recovery in 2022, with the reopening of economic and social sectors assisting it.

In certain states, the greatest floods in decades have slowed recovery in late December 2021 and early 2022.
We expect real GDP to rise by 5.2 percent in 2022, up from 3.4 percent in 2021.

 

The expected strong bounce-back in public investment via a high allocation of development expenditure (RM75.6bil) in 2022, aided by a gradual recovery in the labour market (jobless rate stood at 4.3 percent in October 2021 versus 5.3 percent in May 2020) and a revival of consumer spending (some pent-up demand), will underpin a firmer economic recovery.

However, we warn that growing construction costs, a lack of public implementation ability, and a labour scarcity could cause projects to be delayed, resulting in a tardy release of cash.

 

The general attitude and feeling have improved since the economic reopening, since consumers are now able to travel interstate, which has benefited domestic tourism.
Despite concerns about the Omicron model, people mobility and traffic indicators have been improving.

Visits to retail, recreation, grocery stores, and shopping malls, as well as visits to workplaces, increased.
Due to a resurgence in interstate travel and local tourism, hotel occupancy rates have improved to roughly 40% – 50% in recent months.

Nonetheless, a rebound in international visitor visits (an average of 26.1 million per year from 2015 to 2019 with RM80.7 billion in foreign exchange profits) is seen as vital to keep tourism and allied industries growing at a faster pace.

 

Owners are anxious to restart and continue operations in the pre-Covid state, and businesses are progressively returning to normalcy.
In October, wholesale and retail trade sales rose 5.4 percent year-on-year (y-o-y) to RM116.4 billion, the highest amount on record.

Since June 2021, automobile sales have risen 10.2 percent to RM14.2 billion, following months of double-digit falls.

Due to continued global demand and firmer commodity prices, exports have performed well in the second half of 2021, with several months exceeding expectations.

Electronics and electrical items, refined petroleum, metal manufacturing, chemicals and chemical-related products, as well as palm oil and related commodities, all expanded by 25.7 percent year over year in the first 11 months of 2021.

 

We forecast export growth to decrease to 1.8 percent in 2022 (from 24.5 percent in 2021), as shipments moderate from a high base level of RM102 billion per month in 2021.

Due to the Omicron variety, there is still some ambiguity about worldwide growth.
Due to the time it takes for bottlenecks to clear and manufacturing capacity to ramp up, global supply chain disruptions are anticipated to continue into the first half of 2022.

The speed of manufacturing has also been slowed by a labour scarcity and rising raw material costs.