AmBank Research group chief economist/head Dr Anthony Dass
KUALA LUMPUR: While challenges remain on the horizon for the global economy going into 2023, with the well-documented triple threats of stubborn inflation, continuous rate hikes from central banks and geopolitical tensions, economic experts are confident Malaysia will see a good 2023, buoyed by domestic factors.
Ambank Research chief economist and head Anthony Dass told StarBiz that the recently tabled Budget 2023 is focused on economic recovery as the Covid-19 situation in the country continues its improvement.
“The economy has shown a strong post-Covid recovery in 2022. We now expect the gross domestic product (GDP) growth to surpass our estimates of 6.4% and the official estimates of between 6.5% and 7.5%.
“We have revised upwards our 2022 projection to 7.5% on the view that the third quarter (3Q) GDP would be better than the 2Q GDP growth of 8.9%.
“This is despite facing a weaker global economy as well as the rising US dollar. Upside to our full-year GDP is 8.5% based on the outcome of the second-half (2H) performance,” he said.
Growth drivers in 3Q, according to him, would come from the strong trade segment.
“Besides, the economy would benefit from domestic activities following the reopening of the borders, healthier labour market, healthy consumer spending, firm business activities and expansion, inflows of foreign direct investment or FDI approved and implemented, and steady growth in domestic direct investment or DDI,” he added.
However, he admits there are a number of major challenges still facing the country, such as a weak ringgit and the rising cost of living, and that Budget 2023 has been tabled to specifically deal with these issues.
Inflation will also continue to remain as a concern.
However, he thinks the price spikes would unwind into a deflationary rush in 2023 from the aggressive rate hikes, slowing down of the global economy and improving supply chain constraints as supply and demand imbalances improve.
“Going into 2023, we project inflation to average 2.5%, with an upside surprise of 2.8%.
“The mismatch between supply and demand should soften and provide some breathing space on the cost side. Also, we expect the ringgit to start firming up as the dollar play fizzles,” said Dass.
As for the economy, the research firm projects the GDP for 2023 to be at 4.5% with Malaysia being well positioned to benefit from the high commodity price environment.
Going forward, he said there was a need to carefully calibrate the withdrawal of fiscal support measures while ensuring, consistency with monetary-policy objectives.
“A lot of countries are expected to tighten their fiscal policies in 2023 to reach the highest level since the early 1990s. Such rolling back of the fiscal support could amplify the effects of monetary policy on growth.
“And there is a need for authorities to implement credible medium-term fiscal plans and provide targeted relief to vulnerable households,” he added.
