Malaysia’s GDP is set to surpass official estimates of 5.3% – 6.3% growth in 2022, with the economy experiencing growth of 8.9% in the second quarter.
Finance Minister Tengku Abdul Aziz said the country is likely to see even stronger growth in the third quarter of this year, despite a weaker global economy and the rising US dollar.
He said: “Also important is that inflation in Malaysia is now around 2.8% in the first seven months. Our monetary policy remains accommodative, although Bank Negara Malaysia (BNM) has increased the overnight policy rate (OPR) by 25 basis points to 2.50%, which is still lower than what it was before the [Covid-19] crisis at 3% to 3.25%,, he told delegates to the recent ‘Recovery and Resilience: Spotlight on Asean Business’ forum.
Tengku Zafrul said government subsidies helped to “soften the blow of high energy prices” for consumers, although the subsidy cost the country around RM80 billion in 2022, making it the largest government subsidy in the country’s history.
“We are fortunate to see where we are today this year. Of course, Malaysia being a net exporter of commodities has helped. We are an integral part of the (global) supply chain for manufacturing,” he added. “What is important at the end of the day is the medium to longer-term prospects of the economy.”
He added that for the Budget 2023 the government would be focusing on sustaining economic growth, making sure this growth is inclusive and fiscally responsible.
China trade helps boost economy
One of the drivers of Malaysia’s economic comeback is the country’s strong trading links with China, which is set to grow again in 2022.
The Ministry of International Trade and Industry (MITI) believes bilateral trade between Malaysia and China could surpass RM850 billion ($190 billion) this year based on current trends and could hit RM900 billion.
MITI deputy minister Lim Ban Hong said Malaysian countries and the relevant authorities “will have to work hard on the target and keep the momentum going”.
In the first seven months of this year trade with China had grown by 16.9% compared with the same period of 2021.
Exports grew by 13.2%, boosted by increased exports of electrical and electronic products, liquefied natural gas and scrap metal.
“Meanwhile, imports from China climbed by 19.8%,” he said in his keynote speech at the recent 4th Malaysia-China B2B Business Matching Session, part of the China-Asean Expo (CAEXPO) 2022 event.
He said the implementation of the Regional Comprehensive Economic Partnership (RCEP) would create a more transparent, specific, rules-based framework for trade and investment among the signatories, while strengthening the integration of companies in the global value and regional supply chain, notably between Malaysia and China.
Lim said: “The RCEP provides a strategic platform for businesses to collaborate and forge closer economic integration and will thus be built by leveraging on lower tariffs, stronger logistics connectivity, as well as intensifying the trade of goods and services through a more robust trade ecosystem in the region.
“I hope Chinese business leaders will continue to leverage on Malaysia’s conducive business and investment climate and a strong regional business network to forge a win-win partnership with Malaysian companies,” he said.
These collaborations could easily be facilitated by the partnership between the Malaysia External Trade Development Corporation (MATRADE) and China Construction Bank (CCB), he said.
MATRADE chief executive officer Mohd Mustafa Abdul Aziz said Malaysian companies should be proactive and take advantage of CAEXPO and CCB’s Matchplus programme for business expansion.
He said more than 30 Malaysian companies looking for Chinese investments or business collaboration opportunities and over 300 business meeting sessions had been arranged by CCB for Malaysian participants.