Jan
A Glimpse of Malaysia’s Financial Forecast 2023
Malaysia’s economy is the third largest in Southeast Asia. The inflation rate which is only around 0.4%, with a poverty rate of 3.5%, makes Malaysia one of the countries whose economy developed rapidly after the 1998 economic crisis that fluctuated in most Asian countries.
Meanwhile, Malaysia is known for its abundant agricultural industry, especially in the production of rubber and coconut oil. Its major export partners are from China, Singapore, Thailand, as well as the United States. Continuing exports are mainly in parts of electronic equipment, liquefied natural gas, wood products, rubber and also textiles. Malaysia also successfully gained a good rank for their ease of doing business worldwide.
In addition, Malaysia’s financial forecast is expected to grow moderately between 4-5 percent up to next year, compared to 6.5-7 percent this year. This growth mainly depends on the construction sector (4.7 percent), manufacturing (3.9 percent), agriculture (2.3 percent) and also mining (1.1 percent).
So, what are the things involved in the financial forecast of Malaysia this year?
9 Main Focus of the 12th Malaysian Plan
The Malaysian Plan is a state development program made every 5 years. The 12th draft is forecasted to make Malaysia a high-income economy by 2025, eradicate poverty, increase the contribution of small businesses to total economic output, just to name a few.
Around RM400 billion is allocated for the new and ongoing projects. The 12th Malaysian Plan is the largest funded plan ever. Previously, the 11th Malaysian Plan, designed in 2016, only allocated around 54 percent of the current draft.
The 12th Malaysian Plan themed “Malaysia Prosperous, Inclusive and Sustainable”, will have nine main focuses. It was presented by Malaysia’s Prime Minister, Datuk Seri Ismail Sabri Yaakob, the 12th plan was enacted when the world was facing the unpleasant challenges of the Covid-19 pandemic and was an important plan as a complement to the Malaysian National Recovery Plan. Thus, restoring the speed of economic growth and achieving long-term development financial forecasts.
The main focus amongst this forecast is getting Malaysia’s economy back on track, especially following the negative impact of the Covid-19 pandemic. The 12th Malaysian Plan also pays special attention to closing income and development gaps in some of Malaysia’s less developed states, such as Sabah and Sarawak.
Basically, the 12th Malaysian Plan forecasts for the period of 2021-2025 includes nine main focuses:
● Boost economic growth,
● Strengthening growth catalyst management,
● Improve the well-being of Malaysian families,
● Strengthening security and public order and eradicating extreme poverty and bridging the income gap,
● Empower the Bumiputera Agenda and Malaysian families,
● Boost the development of Sabah, Sarawak and other less developed states,
● Accelerate green growth,
● Improve the efficiency of public service delivery,
● Ensure an effective policy implementation.
That was a glimpse of the forecast in the 12th Malaysian Plan. Thus, find out the things that are driving the soaring economy of Malaysia starting from the second quarter of 2022.
Malaysia’s Economic Forecast Escalated Since the 2nd Quarter 2022
As mentioned earlier, Malaysia’s economic forecast is predicted to grow 6.7% year-on-year (y-o-y) in the second quarter of 2022. What’s the reason of this growth? This solid economic growth was due to the reopening of the Covid-19 strict restrictions in April which brought people’s activities back to normal. Thus, followed by a low base effect that makes Malaysia’s economy on the rise until now. In addition, this percentage is higher than the first quarter, which was about 5% y-o-y.
Here are some other reasons Malaysia’s economy is soaring:
● A sharp 30% y-o-y jump in the second quarter of 2022 export growth. Whereas, the export growth of 22% comes from the first quarter.
● Malaysia’s past economic forecast is also supported by an increasing labor market that boosts the power of purchasing. Where, the labor market has increased with the unemployment rate declining to 3.9% in May 2022.
● While wholesale and retail trade sales also experienced a better surge, around 19.9% increase and manufacturing sales increased 15.7% also supported the growth.
However, the Malaysian economy will still be overshadowed by the global economic slowdown and the increase in the benchmark interest rate of the United States central bank (The Fed). Thus, the overall export growth is doing well, but only its open economy is facing some challenges. Besides the challenges driven by the US Fed, Europe’s energy insecurity from the Russia-Ukraine war, and even as China tries to recover from the pandemic-induced lockdowns are real proof of the challenges so far.
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5 Things About the World Bank’s View of Malaysia’s Financial Forecast
Globally, a 2023 world economy forecast, which was seen on social media, some countries are about to experience a recession. Despite the news that shocked the public, the World Bank seems to have a different view of the country of Malaysia. Here’s the World Bank’s view of Malaysia’s economy:
● Malaysia’s economy is still strong— Malaysia still has the impact of inflation, especially with the increase in food prices of more than 7%, and also the lack of domestic workers as factors that affect the development of the country’s economy. However, the National Bank of Malaysia increased the Overnight Policy Rate (OPR) will help overcome inflation and future economic pressures.
● Malaysia’s GDP will increase in 2022, and will stabilize in 2023– Although Malaysia’s Ringgit is weakened, its economy is still good for 2022 compared to some other countries in Southeast Asia. The World Bank is once again positive about Malaysia’s economic development by targeting the GDP from 4.2% previously, to 4.5%.
● Long-term projects help the national economy— Through the increase in long-term projects that have been invested in before, the World Bank is also confident that these projects will help Malaysia meet the economic challenges by 2023.
● Malaysia towards a high income country— The presence of new investors and an increase in earnings will occur slowly.
● Malaysia’s tourism industry is expected to increase— The World Bank is positively in Malaysia’s economic development through the tourism sector. More and more countries have started allowing out-of-state travelers and accepting travelers from overseas.
That would be a glimpse of Malaysia’s financial forecast in the next few years. In essence, the Malaysian economy is forecasted to be stable and slowly improve. Thus, the country will not be affected by the recession.
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