July 5, 2022

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Malaysia economy likely returned to growth in Q4, Omicron a threat

  • Malaysia’s GDP seen expanding 3.3% in Q4
  • Q4 GDP data due at 0400 GMT, Feb. 11

BENGALURU, Feb 9 (Reuters) – Malaysia’s economy likely bounced back to growth in the final quarter of 2021, propelled by strong exports and private investments, but the fast-spreading Omicron coronavirus variant poses a threat to the outlook, a Reuters poll found.

Growth in Southeast Asia’s third-largest economy rebounded last quarter to 3.3% year-on-year after shrinking 4.5% in the July-September period, according to the median forecast of 20 economists polled Feb. 3-8.

Forecasts for the change in gross domestic product (GDP), due to be released on Feb. 11, ranged from 1.5% to 6.3%, highlighting uncertainty over the pandemic’s impact on output and activity.

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“Q4 2021’s economic recovery reflected relaxation of virus containment measures as Malaysia made further progress towards economic normalization,” noted Chua Han Teng, an economist at DBS Group Research.

“Looser virus curbs not only benefited private consumption and services activity, but also aided manufacturing activity and exports, which played catch-up in fulfilling order backlogs caused by the lockdowns in Q3 2021.”

Malaysia’s exports and industrial production rose strongly in December from a year earlier, suggesting a sharp recovery in economic activity.

The economy benefited from higher commodity prices and robust demand for semiconductors amid a global shortage of chips, which power everything from cars to remote work equipment.

However, a significant economic slowdown in China, Malaysia’s largest trading partner, posed a major challenge to the resource-rich country.

Bank Negara Malaysia (BNM) at its Jan. 20 meeting warned that risks to the outlook were tilted to the downside.

A Reuters poll on the longer-term outlook for Malaysia taken in mid-January was relatively upbeat, predicting 4.3% growth this quarter – with a 0.7%-6.6% forecast range – and 5.8% overall expansion in 2022.

Growth going forward will depend on how the pandemic progresses.

Although the government gradually eased some restrictions, the country is not free from the virus. Malaysia reported the highest daily figure in four months on Saturday, due to the highly transmissible Omicron variant.

Vincent Loo, senior economist at KAF Investment Bank, said the economy was expected to gain pace over the coming quarters following encouraging progress in vaccinating the population.

“The single biggest risk factor continues to emanate from the Omicron wave that is now causing a spike in recent cases to more than 11,000 per day, though the bulk of these cases continue to remain in the mild or asymptomatic categories,” he added.

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Reporting by Devayani Sathyan; Polling by Vivek Mishra; Editing by Ross Finley and Bernadette Baum

Our Standards: The Thomson Reuters Trust Principles.