The conflict in Europe is disrupting the recovery of the global economy after two debilitating years under Covid-19 lockdowns.
The World Bank's global economic growth forecast, already less than favourable before the invasion, is now expected to be even more so.
If inflationary pressures increase due to disruptions to the supply chain, particularly for oil and gas, and the fall of economic activity, this means we will be entering a phase not seen since the 1970s: stagflation.
Malaysia has, to date, been able to weather the storm (continued double-digit growth in trade for February this year, though some experts believe that this will moderate over the coming months).
Bank Negara has been monitoring developments in our prices, but has maintained a low overnight policy rate.
The finance minister has reaffirmed the ministry's forecasts for this year that the domestic economy will expand between 5.5 and 6.5 per cent.
It remains to be seen if these forecasts will bear out, especially if developments in Europe worsen. Regardless, events from the past two years are indicative that a country need a resilient economy, not just a growing one.
Economic resilience is the ability to resist, limit and recover from shocks, such as financial crisis, natural disasters and wars. It gained prominence following the 2008 global financial crisis.
The Organisation for Economic Cooperation and Development (OECD) said one method to assess economic resilience is to look for imbalances in a country's financial, non-financial, public and external sectors, as well as asset market.
OECD said policies and regulations offer the best options to deal with vulnerabilities.
Prudent banking regulations, as well as efficient tax and expansionary monetary policies can be used for economic impact mitigation and recovery.
OECD has also identified the use of structural policies as the key to boosting the recovery of economies from shock. This is mostly done by allowing markets for goods, services and factors of production to operate more seamlessly.
According to the FM Global Resilience Index, the most resilient economies are in Europe and North America, with a few in Asia.
The most resilient economy is Denmark (with a score of 100), followed by Norway (98.1) and Luxembourg (96.7).
In Asia, the most resilient economies were Australia (90.3), New Zealand (89.7) and Japan (82).
For the United States , their resilience ranged from 91.7 (central zone) to 85.4 (west coast). China's range is in the mid-40s.
In Southeast Asia, Malaysia is 44th with a score of 64.7 behind Singapore (91.3) and Brunei (65.2).
The Malaysian government is no stranger to economic shocks.
Malaysia's actions during the 1997 Asian Financial Crisis are well documented. The most recent challenge has been the Covid-19 pandemic.
Managing the implications on public health and the economy is the most challenging problem.
Nevertheless, some success has been achieved. Malaysia is ranked 13th in the Nikkei Covid-19 Recovery Index, partly due to the success of Covid-19 National Immunisation Programme.
The real challenge is reforming and restructuring its economy to be more resilient.
Efforts have been made to strengthen its banking system since 1997, which Moody's has described as robust.
Malaysia has introduced the Financial Sector Blueprint (2022–2026), which aims to fund and facilitate economic transformation, as well as transition to a more sustainable and resilient economy.
Malaysia has also made great strides in diversifying its economy, its export markets and its exports, reflected in the manner that it continues to enjoy a trade surplus even during challenging periods like these past two years.
Two areas that perhaps need to be looked into are taxation and social safety nets.
Malaysia needs to enhance its narrow tax base. This may require reviewing tax exemptions used to attract investments and reverting to a consumption-based tax.
The other matter that needs to be addressed is strengthening the social safety net. The pandemic has shown that many Malaysians, especially those in vulnerable groups, are living precarious lives with insufficient savings.
These efforts should be taken to complement investments in other areas, notably in public health, public education, re-training and research and development.
We are blessed that Malaysia's economy is relatively resilient, but much work ahead remains.
Reforms and further restructuring will be painful but highly necessary.
The writer is deputy head of cluster, National Institute of Public Administration (Intan)
The views expressed in this article are the author's own and do not necessarily reflect those of the New Straits Times