KUALA LUMPUR, March 29 — Malaysia’s gross domestic product is expected to grow between 4 and 5 per cent in 2023, underpinned by strong consumer spending as the job market and wages continued to show signs of improvement, Bank Negara Malaysia (BNM) announced today.

The forecast officially ruled out any concerns of a recession amid a gloomy outlook of the global economy.

Stronger than expected growth in hiring and income have helped Malaysia weather the volatility so far, BNM governor Tan Sri Nor Shamsiah Mohd Yunus said at a press conference to announce the banks’s 2022 Economic Monitor Report.

BNM said it expects inflation to trend lower by year-end although it would remain "elevated”, forecasting it to be between 2.8 to 3.8 per cent.

"On the global front, Malaysia can expect to benefit from the reopening of China, resilient labour markets supporting demand in major economies, and the recovery in tourism activity,” Nor Shamsiah said in the foreword of the economic monitor report.

"Nevertheless, 2023 will remain challenging and uncertain for most economies. Global growth is expected to expand at a slower pace amid an environment of high inflation and tight monetary policy.”

The bank said it saw risk to the country’s growth to be "fairly balanced” although prolonged geopolitical tension and a tight interest rate environment is set to weigh on the global economy, which could spook consumers and businesses and drag down trade performance.

Domestically, there was a risk that a "higher-than-expected” inflation rate would weigh on spending and investment decisions, the bank added.

Headline and core inflation throughout 2022 reached record highs as pent-up spending compounded the global supply chain bottleneck. As such, BNM said there are already signs that the price crunch would ease, with expectation that prices of key commodities would average lower amid improving supply constraints and global demand softens.

Price controls and subsidy measures will continue to contain inflationary pressures, the bank added, but cautioned that the prolonged war between Russia and Ukraine, an unfavourable exchange rate, extreme weather conditions, and stronger-than-expected demand from China could still send prices soaring or keep them up.