Published on 08 Dec 2021.
In its Economic Outlook 2022 report released today, RAM Ratings foresees the Malaysian economy staging a rebound on most fronts, riding the positive momentum of the country’s high vaccination coverage and ongoing vaccine booster rollout. The resumption of most economic activities without the risk of further wide lockdowns is a key risk driver of RAM’s forecasts. The recent emergence of the Omicron variant, while posing a potential threat, could delay recovery but not completely derail it. The reimposition of nationwide lockdowns is not within our current base case scenario.
We project Malaysia’s economic growth to reach 6.8% for 2022 from an estimated 3.8% in 2021. Low base effects will visually prop up y-o-y GDP growth in 2022 but output in absolute terms is still below potential, anticipated to be only circa 4.6% above 2019’s output. Negative output gap is expected to persist in 2022, albeit narrower than the past two years.
RAM estimates a fiscal deficit of 5.9% of GDP in 2022, in line with the government’s projection of 6.0% under Budget 2022 and down from the latter’s 6.5% estimate for 2021. Better growth prospects and significant gains from one-off and adjusted tax policies are upsides to the budget, despite the higher budget allocation for 2022. Fiscal space remains fairly tight, with government debt projected to amount to RM1.1 tril in 2022 (or 65.0% of GDP) and the debt servicing burden significant at 17.2% of total projected revenues for the year (2021: 17.6%).
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Woon Khai Jhek, CFA
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