2022 will be tough but better than 2020, say economists

Economists expect another challenging year ahead in terms of the economy due to continued uncertainty over Covid-19 at the global level coupled with the floods that hit several states in the country last month, although they say things will not be as bad as they were in 2020.

Speaking to MalaysiaNow, they said the downside risk would continue through 2022, especially in light of Omicron, the newest Covid-19 variant which has sparked international market concern.

However, they also noted the reopening of the economic and social sector as well as Malaysia’s strong vaccination rate against the virus.

Bank Islam Malaysia chief economist Afzanizam Abdul Rashid said Malaysia’s performance in the first nine months of 2021 was proof that the country was on track to recovery, noting the 3% growth against the contraction of 6.4% in the same period the year before.

“There are positive developments compared to the situation in 2020,” he said.

“But the risk of losses in 2022 is still real, and we cannot ignore it as it could affect the situation in Malaysia’s capital market.”

He said Malaysia’s economic performance in 2021 contracted in early July when the movement control order was imposed to curb the spread of Covid-19.

“The economy contracted 4.5% in the third quarter after registering a growth of 16.1% in the second quarter,” he said.

“But Malaysia’s performance is expected to show improvement in the fourth quarter given the achievement of herd immunity and the reopening of state borders and activities.”

Economist Yeah Kim Leng said the recent floods which left a number of states including Selangor and Pahang badly affected would stunt Malaysia’s economic growth.

However, he said the effect would not be the same as that of Covid-19.

Yeah, of Sunway University, said while performance in the fourth quarter of 2021 might be negative due to disruptions in economic activity, the country would still record overall growth for 2021.

“While the destruction caused by the floods cannot be denied, the crisis is short-term in nature unlike the spread of Covid-19,” he said.

He said the Omicron variant would likely be the main focus at the global level due to concerns that it would cause another wave of infections.

Meanwhile, Malaysia’s exports which showed an uptick in 2021 are also expected to drive the country’s economic growth this year, he said.

“The important thing is for Malaysia to ensure the strengthening of demand from abroad and an increase in purchasing power at the domestic level.

“This will drive better performance in the year ahead,” he said.