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SERC: Five key factors that may hinder Malaysia’s economic growth in 2022

A Malaysian flag is pictured at Dataran Merdeka in Kuala Lumpur September 15, 2021. — Picture by Yusof Mat Isa
A Malaysian flag is pictured at Dataran Merdeka in Kuala Lumpur September 15, 2021. — Picture by Yusof Mat Isa

KUALA LUMPUR, Jan 4 — The Socio-Economic Research Centre (SERC) today warned of five risks that could hinder Malaysia’s economic growth this year.

Its executive director Lee Heng Guie said they are: Covid-19 contortions, government policies, China’s economic slowdown, price pressure and winding-down domestic relief measures.

“We see the following five risks that could temper the continued expansion of Malaysia’s economy; the Covid-19 contortions — lingering risk of Omicron variant would dent consumer confidence and business sentiments, forcing reimposition of some mobility restrictions.

“This will temper the overall global recovery picture and impact Malaysia’s external sector,” he told reporters during a media briefing online.

Elaborating on federal policies, Lee said rising inflation is one of the risks under this category and it signalled three rate hikes in 2022.

Inflation risks are said to also spillover to Malaysia’s shore via financial channels and the weaker ringgit against the US dollar.

Regarding China’s economic slowdown, one of the impacts would be struggles with real estate woes and fallout from the sporadic Covid-19 lockdowns.

Lee said China’s economic slowdown could also dampen demand for mineral and commodities, while it could also cause a 1 per cent decline in gross domestic product, which would shave Malaysia’s growth by 0.3 to 0.5 percentage points.

As for price pressures, Lee said higher input costs, supply constraints and shortage of workers should be anticipated.

Malaysians could also be expecting higher cost of living, but will see gradual recovery in labour market conditions and improvement in nominal wages.

Lee added that government aid reduction, such as the Prosperity Tax rate, could also pose a risk to corporate earnings and reduce dividend payments or payouts.

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