KUALA LUMPUR: Malaysia’s economy is expected to grow 3.7 per cent this year and further expand to 6.0 per cent in 2022 amid the recovery in economic activities, said MIDF Amanah Investment Bank Bhd (MIDF Research).
Economist Abdul Mui’zz Morhalim said the recovery in domestic economic activities would continue as both consumers and businesses increase their spending due to the better outlook.
Better investment activity and stable inflation, coupled with continued growth in external demand, especially for electrical and electronic and commodities, would also lend support to growth next year, he added.
“Inflation is anticipated to be at 2.1 per cent in 2022.
“With the economy expected to recover and inflationary pressures to return, MIDF Research also expects Bank Negara to undertake a hike of 25 basis points at the end of the second half of 2022,” he told a media briefing on 2022 MIDF Market Outlook here today.
The research house expects prices of commodities to remain elevated, with the Brent crude oil price averaging at between US$75 and US$80 per barrel while crude palm oil is forecast to average at RM3,300 per tonne.
On potential downside risks, the investment bank’s head of research Imran Yassin Md Yusof said several issues seen this year might spill over into 2022, such as the Omicron factor, inflationary pressures, a pullback in China’s property market and a possible 15th general election.
“In our base-case scenario, these issues will lead to some disruptions in the economic recovery, even though the occurrence of any of these events, either in isolation or in combination, will not derail the recovery process,” he said. “The possibility of these events turning out worse than expected cannot be discounted given our experience this year, hence, investors need to be ever vigilant of the possible downside risks next year.”
On the equities market, MIDF Research’s head of strategy Syed Muhammed Kifni Syed Kamaruddin noted that the FTSE Bursa Malaysia KLCI (FBM KLCI) has been a laggard when compared with regional peers in 2021. As of Dec 2, the key index had fallen 7.7 per cent on a year-to-date basis.
The FBM KLCI would likely end 2022 at the 1,700 level amid better corporate earnings, he forecast, with the projection dependent on, among others, the liquidity situation remaining sufficiently ample but with the monetary policy on a moderately tightening path, the property market development in China and a general election in Malaysia.
Any upsurge in Covid-19 cases could lead to the re-imposition of some containment measures but would not result in nationwide lockdowns due to the high level of vaccination rates, he said.
“We expect the emerging virtuous dynamics in the real economy would eventually be mirrored in the financial economy,” he added. “We believe that these factors will affect investor sentiment positively, leading to a better performance of our equity market and also that of our regional peers.” — Bernama