KUALA LUMPUR – Despite being fortified by sound economic fundamentals and the economy being on its way to a recovery after turning the corner against the pandemic, Malaysia must be clear-eyed about the challenges on the horizon.
Bursa Malaysia chairman Tan Sri Abdul Wahid Omar said there are a number of factors to be optimistic about the country’s growth outlook.
Most importantly, he said, it was transitioning to the endemic phase with the relaxation of pandemic control measures and the reopening of international borders.
“The endemic phase is likely to contribute to the revival of Malaysia’s tourism industry, which supports 3.5 million jobs.
“The high vaccination rate with close to 80% of the population being vaccinated with two doses is another important factor. This compares favourably against Asean’s rate of 60%,” he said in his welcoming remarks at the Malaysian Economic Summit 2022 organised by the KSI Strategic Institute for Asia Pacific here today.
A sound government policy has provided economic relief and support for the people and businesses, including employment incentives, cash transfers and subsidies, which resulted in a significant decline in the unemployment rate from a peak of 5.3% in May 2020 to 4.1% in May 2022.
Wahid, who is also chairman of the Economic Club of Kuala Lumpur Advisory Council, said Bank Negara Malaysia has forecast that Malaysia’s economic growth to be between 5.3% and 6.3% in 2022 while the World Bank projected the economy to grow by 5.5%.
“However, it is important to note that these forecasts have been downgraded, underscoring the uncertainties within and beyond the country. If there is upside, there will be downside. We must consider domestic and global challenges that will affect the Malaysian economy,” he said.
He said geopolitical risks threaten Malaysia’s recovery, whereby the conflict in Ukraine and the economic sanctions on Russia have created uncertainties and they had exacerbated the supply shocks in commodities such as crude oil, natural gas, wheat and sunflower oil – driving up the prices of food commodities.
“Malaysia also had to contend with these inflationary pressures. Our annual Consumer Price Index went from -1.2% in 2020 to 2.5% in 2021.
“The inflation rate will continue to rise this year. Inflation has been driven by significant increases in transportation and food costs. Food prices have increased between 3.6% and 4.0% in the first quarter of this year.
“Fortunately, the government’s fuel subsidy has kept a lid on further increases on fuel cost. However, the fuel subsidy is a double-edged sword because while it keeps inflation down, the government’s fiscal space will shrink,” he shared.
Another major domestic issue highlighted by Wahid is the political uncertainties that have afflicted the country since the last general election.
He noted that the economic boost from the transition to the endemic phase may be neutralised by the adverse global developments such as the conflict in Ukraine, China’s Covid-19 lockdown and the inflationary pressures.
Therefore, he suggested that the short-term goal of economic stabilisation should focus on supporting domestic demand and addressing the impact of imported inflation from weaker exchange rates and higher fuel prices.
“As always, I am cautiously optimistic that Malaysia will be able to overcome these challenges if we Malaysians were to come together, be constructive and do what we can in our respective roles. Malaysia has weathered similar crises of the past.
“Obviously, there were different factors and will require different sets of solutions. That means we cannot rest our laurels. We must be persistent and focused,” he added. – Bernama, June 14, 2022
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