KUALA LUMPUR: The Malaysian economy is doing reasonably well in the face of global challenges, according to World Bank Group lead economist for Malaysia, Apurva Sanghi.
Analysing Malaysia’s economy from three lenses - macro, meso, and micro - he said the World Bank is forecasting Malaysia's economy to grow 5.5% this year.
This, Apurva said, is higher than the global growth of 2.9% and regional growth of 4.4%
"Malaysia is doing reasonably well, even with the impact of the pandemic compounded by the war in Ukraine, Chinese lockdowns, rising interest rates and fears of stagflation - low growth, high inflation - as we are surrounded by uncertainty," he said.
Apurva was speaking in “The Nation” programme on Bernama TV yesterday.
He also noted that consumer spending is gradually recovering, as is job creation.
On the meso lens, he said according to a World Bank survey, businesses in Malaysia are gradually increasing sales to pre-Covid-19 levels, thanks to the government’s assistance during the pandemic.
"The optimism stems from the pent-up demand, opening up of the economy and higher commodity prices," Apurva explained.
He went on to say that high commodity prices benefit Malaysia because the country exports commodities such as palm oil, liquefied natural gas and petroleum, which account for 80% of all commodities.
"Second, if you look at the geopolitical landscape, there's a bit of trade divergence going on.
"(With) great tensions between the United States (US) and China, and due to security-related issues, the US is sort of diverging in trade, and some of it is coming to East Asia, as well as Malaysia.
"This is especially beneficial to Malaysia's semiconductor industry," he added.
Commenting on the monetary tightening trend globally, Apurva said monetary tightening or interest rate hikes in the US can and does have adverse impacts on output in the East Asian region, including Malaysia.
“There are several factors that reduce the severity of such shocks in the case of Malaysia. Firstly, Malaysia has a flexible exchange rate.
“During periods of external shocks, a flexible exchange rate acts as a great shock absorber and that's what you see the ringgit is doing,” he said.
He also noted that Malaysia has low US dollar-denominated external debt and significant international reserves.
All of these factors combined, he said, would reduce the severity of the impact of monetary tightening in the US and other advanced economies on Malaysia.
On areas for improvement, Apurva said despite the excellent strategies and policies, Malaysia needs to focus on implementation.
“For instance, the Goods and Services Tax (GST) widens the tax base and self-policing because businesses have to issue invoices to get refunds.
“The GST is more stable because it's a tax on consumption. At the end of the day, all of us are consumers. But, in Malaysia, there was a delay in getting refunds,” he said.