22 Jun 2022
Malaysia’s economy is performing “reasonably well” in tackling the global challenges, says World Bank Group lead economist for Malaysia, Dr Apurva Sanghi.
He added that the World Bank forecasts the Malaysian economy to grow 5.5% in 2022, surpassing the global growth figure of 2.9% and regional growth of 4.4%.
“Malaysia is doing reasonably well, even with the impact of the pandemic compounded by the war in Ukraine, Chinese lockdowns, rising interest rates and fears of stagflation — low growth, high inflation — as we are surrounded by uncertainty,” Dr Sanghi commented.
He also said consumer spending is recovering gradually, along with job creation, which has shown improvement.
In addition, a World Bank survey reveals businesses in Malaysia are gradually hiking sales to pre-pandemic levels, thanks to the government support during the crisis.
“The optimism stems from the pent-up demand, opening up of the economy, and higher commodity prices,” he continued.
The economist also said that Malaysia benefits from high commodity prices as the country exports commodities – including liquefied natural gas, petroleum and palm oil – making up 80% of all commodities.
“Second, if you look at the geopolitical landscape, there’s a bit of trade divergence going on. (With) great tensions between the United States and China, and due to security-related issues, the U.S. is sort of diverging in trade, and some of it is coming to East Asia, as well as Malaysia.
“This is especially beneficial to Malaysia’s semiconductor industry,” he added.
In regard to global monetary tightening, Dr Sanghi said rate hikes in the United States negatively impact output in the East Asian region, including Malaysia, Malay Mail reports.
“There are several factors that reduce the severity of such shocks in the case of Malaysia. Firstly, it is that Malaysia has a flexible exchange rate. During periods of external shocks, a flexible exchange rate acts as a great shock absorber and that’s what you see the Ringgit is doing,” he said.
He also stated Malaysia has low U.S. Dollar-denominated external debt and substantial international reserves.
These factors together would lower the impact of the monetary tightening in the U.S., and other advanced economies, on Malaysia.