KUALA LUMPUR (Oct 12): The International Monetary Fund (IMF) has raised its gross domestic product (GDP) growth forecast for Malaysia in 2022 to 5.4% from 5.1%. At the same time, the fund cautioned that for the global economy in 2023, worse is to come. The IMF also projected that Malaysia would grow at 4.4% next year, lower than its initial forecast of 4.7% in July.

The revision upwards for 2022 comes less than three months after the IMF in July cut its projected 2022 growth for Malaysia to 5.1% from 5.6%. The IMF's projection, contained in its World Economic Outlook Report October 2022 released on Wednesday (Oct 12), is lower than Malaysia's official forecast growth of 6.5%-7.0%.

In its report, the IMF also downgraded 2023 global economic growth to 2.7% from 2.9% (its July forecast), with a 25% probability that world GDP would fall below 2%.

The IMF cautioned that more than a third of the global economy would contract this year, and in 2023, the three largest economies — the US, EU and China — would continue to stall.

“In short, the worst is yet to come, and for many people, 2023 will feel like a recession,” it said.

The IMF said the global economy continues to face steep challenges, due to lingering effects from the Russian-Ukraine war, persistent and broadening inflation pressures and economic slowdown in China.

The fund foresees that global inflation may escalate to 8.8% this year, from 4.7% in 2021, before tapering to 6.5% in 2023 and 4.1% by 2024.

Upside inflation surprises have been most widespread among advanced economies, with greater variability in emerging markets.

“As storm clouds gather, policymakers need to keep a steady hand,” it said.

The IMF also highlighted that the sharp appreciation of the US dollar adds price pressure to emerging markets, which are already facing a very challenging external environment as capital flows have not recovered and many low-income economies remain in debt distress.

“The 2022 shocks will re-open economic wounds that were only partially healed following the pandemic,” the fund said.