KUALA LUMPUR, May 17 — The Malaysian economy is expected to return to above pre-pandemic levels with the 2022 gross domestic product (GDP) growth forecast to 7.0 per cent from 6.2 per cent given stronger-than-expected first quarter (Q1) GDP growth, said Standard Chartered Bank (StanChart).
The bank also maintained Overnight Policy Rate (OPR) hikes in 2022 totalling 75 basis points (bps), with two more hikes in July and September 2022, bringing it up to 2.5 per cent by end-2022.
StanChart said the “growth recovery was broad-based” which saw all components expanding quarter-on-quarter (q-o-q), with the exception of investment and trade in services remaining below pre-pandemic levels as of Q1.
“In terms of industries, 18 out of 21 sectors expanded q-o-q, and we estimate that 74 per cent of the economy is above pre-Covid levels,” it said in a research note today.
The bank noted that the labour market has also continued to recover, with strong employment growth and tighter conditions translating to higher wage growth.
It said the economic and labour market recovery “justifies” the move by Bank Negara Malaysia (BNM) to begin the process of normalising monetary policy from emergency settings.
“We expect the process of normalising monetary policy from emergency settings to continue. While inflationary pressure is not substantial, the current low policy rate is not seen as commensurate with the economic recovery,” it said.
StanChart noted that BNM may also want “to take advantage of the robust growth to build policy space” as the policy guidance suggests that more rate hikes are likely.
However, the bank lowered its 2023 GDP forecast to 4.2 per cent from 4.5 per cent previously, due to higher base effects. — Bernama