KUALA LUMPUR (March 30): Bank Negara Malaysia (BNM) has projected Malaysia's economy to grow by between 5.3% and 6.3% in 2022. 

This is slightly lower than the government's official forecast of a 5.5% to 6.5% growth in the nation’s gross domestic product (GDP) for the year. 

“For the Malaysian economy, the recovery is expected to gain momentum in 2022,” said BNM. “This is underpinned by several factors including continued expansion in external demand, full upliftment of containment measures, reopening of international borders, and further improvement in labour market conditions.”

“In addition, the implementation of investment projects and targeted policy measures will provide further support to economic activity and aggregate demand,” the central bank said in its 2021 Economic and Monetary Review report. 

BNM said the external sector will continue to be supported by global demand, with gross exports projected to grow by 10.9%, compared with 26% in 2021.

“Strong demand from major trade partners for electrical and electronic (E&E) products amid the continued technology up-cycle and 5G infrastructure rollouts globally, will provide support to manufacturing, investment and exports,” it said. 

But Malaysia will also be affected by the impact of the military conflict in Ukraine on global growth, BNM said, adding however that the corresponding rise in global commodity prices are expected to provide support to commodity exports and some lift to nominal incomes. 

Meanwhile, gross imports are expected to increase by 8.1%, compared with 23.3% in 2021, reflecting in part the demand for exports of manufactured goods, an improvement in domestic investment activity and consumer spending, which will lead to higher imports of consumer and capital goods. 

BNM said labour market conditions are expected to improve gradually as economic activity picks up, and the unemployment rate is projected to fall further to around 4%. 

Private consumption is expected to post a growth of 9%, up from 1.9% in 2021, as household spending will be primarily supported by recovery in income and employment. 

BNM said the expected recovery in private investment to 5.3% in 2022 from 2.6% a year earlier, reflects the resumption of existing projects and the start of new investment capital spending by businesses. 

Given the rapidly evolving macroeconomic environment, BNM said risks to the domestic growth projection remain tilted to the downside. These risks mainly stem from developments surrounding Covid-19, slower-than-expected rollout of public infrastructure projects, more persistent labour shortages, supply chain disruptions, and higher inflation.

Read more stories from the BNM Annual Report 2021 here.