business

Q2 growth of over 5pc expected 

KUALA LUMPUR: Economists predict that the growth rate of the Malaysian economy will grow by more than five per cent in the second quarter (Q2) of 2022, which would put the country on par with the growth rates of regional competitors such as Indonesia and Singapore.

Furthermore, they added that the growth outlook for the country's gross domestic product (GDP) would continue to remain on solid footing for the year.

Juwai IQI chief economist Shan Saeed said Malaysia's trade and commerce performed well in June 2022, which increased by 43.4 per cent to RM270.39 billion compared to June 2021, the 17th consecutive month of double-digit growth.

He added that exports had recorded the 11th consecutive month of double-digit expansion, registering a strong growth of 38.8 per cent to RM146 billion. As a result, the trade surplus over the last six months has risen to RM123.1billion.

"Malaysia's economy will expand further in the coming two quarters amid geopolitical risk. 

"At Juwai IQI, we maintain our status quo in terms of GDP economic forecast, which is going to meander around four to five per cent in 2022 based on the premise that stable domestic demand and solid investment, along with strong trade and commerce numbers, would keep the trajectory on the upsurge," he told the New Straits Times yesterday.

Shan added that Bank Negara Malaysia could meet its mandate to achieve stability while adding that inflation will stay low as monetary policy levers can tame inflationary pressure.

"Bank Negara is expected to make tactical manoeuvres to maintain structural stability in ringgit with fair market value ranges from 4.10 to 4.45 in the next two quarters," he added.

For Q2, Indonesia's GDP grew 5.44 per cent year-on-year (YoY), as the country enjoyed an export boom driven by high global commodity prices, while Singapore's economy grew 4.8 per cent YoY.

To recap, Malaysia's economy grew 5.0 per cent in Q1 2022, supported by improving domestic demand as economic activity continued to normalise with the easing of containment measures.

The improvement also reflected the recovery in the job market, with the unemployment rate declining further to 4.1 per cent (Q4 2021: 4.3 per cent), as well as continued policy support.

Putra Business School associate professor Dr Ahmed Razman Abdul Latif said that while he is expecting higher GDP growth in Q2, the government must remain cautious for the second half (2H) of the year as the threat of global recession remains a possibility.

"This is considering that one of Malaysia's top trading partners, the US, is under a technical recession due to two consecutive quarters of negative growth for their GDP," he said.

Razman expects Malaysia's full-year 2022 GDP to hit 5.3-6.3 per cent, in line with the central bank's earlier projection.

Universiti Kuala Lumpur's Business School economic analyst Associate Professor Aimi Zulhazmi Abdul Rashid said the GDP is expected to grow at least eight per cent for Q2 following the opening of domestic economic activities from April to June.

The second disbursement from the Employees Provident Fund worth RM10,000 played a role in injecting cash into the economy, especially during the Aidilfitri celebrations and the school holidays.

"However, this comparison of the Q2 is compared to the good Q2 of 2021, which was 16.1 per cent, after contracting by -17.1 per cent in the 2nd quarter of 2020, the lowest ever recorded since the Q4 of 1998.

"Mathematically, the achievement of Q2 this year is on par with Q2 of 2019 (4.4 per cent), which was before the pandemic.

"This is a positive sign that the country's domestic economy can recover," he said.

Growth, however, is expected to be slow in Q3 and especially in Q4 due to the slowdown in the global economy.

"It has already shown its signs when many developed countries, such as the United States, the United Kingdom and the European Union, faced high inflation rates in history following various crises, such as the Russian-Ukraine conflict, the extension of the effects of the Covid-19 pandemic to the value chain which caused a high increase in commodity prices, such as crude oil, wheat, corn, iron, cement and so on," he added.

He said another rate hike is also expected in September this year, which may cause an increase in loan rates that would impact the country's domestic economy.

When the cost of loans is higher, he said consumers and businesses would reduce efforts to spend, thus not expanding the business.

"This will have a negative effect by slowing down the country's economic recovery from Q4 onwards," he said.

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