Summary of Malaysia’s economic review from February to April 2022, published by Department of Statistics Malaysia

2022 is the year where the long-awaited resumption of “normalcy” especially in global economics begins. Geopolitical uncertainties continue to pose as a hindrance to recovery efforts, affecting global economy through financial sanctions, commodity prices, and supply chain disruptions. In addition, some cities in China that serve as the country’s manufacturing and trade centres are sealed off due to COVID-19 regulations, aggravating the global supply chain and affecting China’s industrial production and export activities. Therefore, it is estimated that global growth rate will shrink to 3.6% in 2022 from 6.1% in the previous year, with expected continuation of growth spurt into 2023. (International Monetary Fund (IMF) World Economic Outlook, April 2022)）
 

Malaysia’s inflation rate is on the rise, similar to other countries

A spillover effect from the global economic turmoil is a hike in inflation rates. Countries around the world are experiencing inflation, especially in America, which have resulted in the tightening of government monetary policies. On a similar note, further increment in commodity prices could continuously push inflation rate and expectations in the coming months. There is growing concern that the policy changes in America could have adverse impacts on the financial stability of other nations, slowing down recovery efforts from COVID-19 pandemic.

Back in Malaysia, developments in the global scenario were also reflected in comparison of several key indicators in February 2021 and 2022. The most notable indicator is the country’s inflation rate. Like other countries, Malaysia recorded a higher inflation rate of 125.2 (increment of 2.2%) this February compared to 122.5 of that last year.

The rise in inflation rate persisted on from the previous month, exceeding the country’s 2011 to February 2022 average of 1.9%. The main contributors for the rise are Transportation (3.9%), Food and Non-Alcoholic Beverages (3.7%), and household furniture, goods, and maintenance (3.2%) indices. Simultaneously, the rise in the Mining Index (23.3%), Agriculture, Forestry and Fisheries Index (17.7%), and Manufacturing Index (7.9%), saw a rise in the Producer Price Index (PPI) for local production from 9.2% back in January to 9.7%. Other key indicators also maintained strong economic performances in February 2022.

Malaysia's trade industry remained strong, recording RM184.8 billion, up 17.5% from RM157.3 billion in February 2021. Exports also grew 16.8% to RM102.3 billion from the previous year, while imports recorded an 18.4% increment to RM82.5 billion from last year, expanding the trade surplus by 10.7%. The industrial production index (IPI) also grew 3.9% year-on-year from the production growth in the manufacturing (5.2%) and electricity (3.9%) sector. Sales in the manufacturing industry also grew by 11.2% year-on-year to RM131.6 billion. On the other hand, wholesale, and retail sales, rose 8.5% from last year to RM117.2 billion, mainly contributed by the surge in retail, wholesale, and automobiles sales.
 

Expectations of economic recovery as we enter into an endemic period

The resumption of the country’s economy and social activity has led to the recovery and revival of businesses and the domestic tourism sector, benefiting the country’s labor market. The number of employed workers in February 2022 have increased by 3.0% to 15.73 million with an improvement in the unemployment rate to 4.1%. The employment-to-population ratio is higher by 1.1 points at 66.3% in February 2022, up from 65.2% the previous year, demonstrating the country’s ability in creating job opportunities.

Malaysia started moving into the endemic phase from April 1st, 2022, allowing quarantine-free international travels with the opening of travel borders. The Malaysian economy is expected to strengthen this year due to optimistic measures in place such as the abolishment of border restrictions, which in return promoted cross-border business activities, trade, and investment-related services, resulting in an increase in demand for goods and services, higher productivity, and higher employment rates. However, as mentioned by the World Health Organization (WHO), COVID-19 still has the possibility of causing further pandemics around the world, therefore, the public is still advised to remain vigilant and to continue practice of prescribed SOPs (Standard Operating Procedure) in ensuring the containment of the virus.