Malaysia posts fastest growth in decades, but global slowdown clouded

Kuala Lumpur – Malaysia will grow at its fastest pace in over 20 years in 2022. Because, even if the title is likely to be short-lived, it helped the country gain the mantle of Asia’s fastest growing economy.

The country’s gross domestic product grew 8.7% last year, the highest level since 2000, according to data from Bank Negara Malaysia (BNM) and the Department of Statistics. This compares with a Bloomberg survey of median year-over-year growth of 8.6% and is in line with official expectations.

Between October and December, the economy posted a better-than-expected 7% expansion, supported by domestic demand. But on a continuous basis, data showed the economy contracted 2.6% from the quarter ended September. This is a performance officials attributed to less stimulus support.

That points to the risk that Malaysia could lose the top spot among 13 Asian economies tracked by Bloomberg, with economists expecting the pace of expansion to slow to 4% this year. In 2022, cash transfers and food and fuel subsidies helped sustain demand despite a 100 basis point rate hike, but a slowing global economy hurt exports and dimmed the outlook. There is likely to be.

“The risk balance for growth remains tilted to the downside due to external factors,” Central Bank Governor Nor Shamsaiah Yunus said at a briefing on Friday. Still, she added, the risks are not great enough to push the economy into recession.

Export growth of nearly 6% in December was weaker than expected, decelerating sharply after 16 straight months of double-digit expansion. Headline and core inflation are expected to moderate this year, but the government expects them to remain elevated.

There is a bright spot on the horizon. Economists at RHB Bank said ahead of the data that an expected Chinese economic recovery in the second half of the year could provide further support given China’s role as Malaysia’s largest trading partner for the 14th consecutive year. rice field.

“We will benefit from the impact of China’s reopening of activity, which will also help boost growth this year,” Shamsia said. A slowdown in exports due to lower global demand will be partially mitigated by increased tourism activity, he said.

Malaysian policymakers raised borrowing costs by a quarter percentage point for the fourth consecutive time last year to fight inflation, but remain focused on protecting the economy from a bleak global outlook. increase. BNM unexpectedly kept borrowing costs unchanged at its meeting last month as it sought to assess the impact of past adjustments.

At current levels, “monetary policy remains accommodative and supportive of the economy,” he said.

Prime Minister Anwar Ibrahim is expected to announce a new spending plan for 2023 within two weeks. This could include new economic forecasts and a focus on rising sovereign debt levels.bloomberg