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Malaysia Central Bank forecasts economy’s expansion in 2022

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KUALA LUMPUR: Malaysia’s better Covid-19 management and higher vaccination rate will help mitigate the adverse impact of future resurgences and protect the healthcare system from being overwhelmed, Bank Negara Malaysia said Wednesday.

“With these factors in mind, we expect less disruption to economic activity and spending in the event of resurgences,” the central bank said.

The country’s central bank expects the economy to expand 5.3%-6.3% in 2022, driven by the lifting of Covid-19 restrictions, reopening of borders, growth in external demand, and an improvement in the labor market.

Malaysia’s economy expanded 3.1% last year, after contracting 5.6% in 2020.

Bank Negara’s gross domestic product forecast is slightly lower than the Malaysian government’s projection for growth of 5.5%-6.5% this year.

Apart from the pandemic, Bank Negara also highlighted other key challenges, including ongoing geopolitical tensions, which have led to commodity price shocks and supply-chain disruptions.

Lingering inflationary pressures have also raised concerns about the cost of living and profitability, thus weighing on household and business sentiment, the central bank said.

Bank Negara said it expects headline inflation to average 2.2%-3.2% in 2022 amid higher core inflation, which is estimated at 2.0%-3.0% this year due to stronger demand conditions and lingering cost pressures.

Price pressures in 2022 should largely reflect a normalization in prices after a period of subdued demand and reduced profit margins during the pandemic, the central bank said.

“However, the extent of upward adjustments in core inflation will remain partly contained by the continued slack in the economy and labor market,” Bank Negara added.

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