World Bank economist: Malaysia’s economy doing well despite global economic uncertainties
21 Jun 2022
The Malaysian economy is doing reasonably well in the face of global challenges, according to World Bank Group lead economist for Malaysia, Dr Apurva Sanghi.
Analysing Malaysia’s economy from three lenses, namely macro, meso and micro, he said the World Bank is forecasting Malaysia’s economy to grow 5.5 per cent this year, higher than the global growth of 2.9 per cent and regional growth of 4.4 per cent.
“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,” he said on Bernama TV’s The Nation programme today.
He also noted that consumer spending is gradually recovering, as is job creation, which is gradually improving.
Moving on to the meso lens, he said that according to a World Bank survey, businesses in Malaysia are gradually increasing sales to pre-Covid-19 levels, thanks to the government’s assistance during the pandemic.ADVERTISING
“The optimism stems from the pent-up demand, opening up of the economy, and higher commodity prices,” he explained.
He went on to say that high commodity prices benefit Malaysia because the country exports commodities such as palm oil, liquefied natural gas, and petroleum, which account for 80 per cent 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 (US) and China, and due to security-related issues, the US 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.
Commenting on the monetary tightening trend globally, Apurva said monetary tightening or interest rate hikes in the US can and does have adverse impacts on output in the East Asian region, including Malaysia.
“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 noted that Malaysia has low US dollar-denominated external debt and significant international reserves.
All of these factors combined, he said, would reduce the severity of the impact of monetary tightening in the US and other advanced economies on Malaysia.
On areas for improvement, Apurva said despite the excellent strategies and policies, Malaysia needs to focus on implementation.
“For instance, the Goods and Services Tax (GST) widens the tax base and self-policing because businesses have to issue invoices to get refunds.
“The GST is more stable because it’s a tax on consumption. At the end of the day, all of us are consumers. But, in Malaysia, there was a delay in getting refunds,” he said, adding that there is a need to ensure systems are in place as well as communication of any tax reform.