KUALA LUMPUR, Nov 1 — Malaysia’s gross domestic product (GDP) is forecast at 4.0 per cent for 2021 and 5.5 per cent for 2022, aligned with official targets, UOB Malaysia said.

Its senior economist, Julia Goh said the improved outlook was augmented by broader vaccine coverage, supportive global demand, Malaysia’s transition to an endemic phase, normalising domestic demand, resumption of infrastructure spending, and further fiscal support.

"A release of pent-up demand is anticipated, particularly for domestic travel and leisure that further supports the recovery,” she said in a research note today.

Barring any unexpected risks, the government targets real GDP to rise to 5.5 per cent-6.5 per cent in 2022, marking a higher expansion from projected 3.0 per cent-4.0 per cent in 2021.

Growth for 2021 was revised down from an initial projection of 6.5 per cent-7.5 per cent tabled under Budget 2021.

Goh said a release of pent-up demand is anticipated, particularly for domestic travel and leisure that further supports the recovery.

"Potential downside risks include the emergence of new virus variants, slower China’s economy and regulatory tightening, commodity price shocks, energy supply crunch, elevated inflation, heightened volatility amid tighter global monetary policy, and geopolitical risks,” she added. 

UOB Malaysia also cautioned on the possibility of a resurgence in Covid-19 infections due to new virus variants and waning efficacy of vaccines.

"As such, some contingencies are in place, including administering booster vaccine doses and keeping a balance of RM10 billion from the Covid-19 Fund as a buffer,” she said. 

She said the return to normality was critical for the survival of thousands of businesses, particularly in the hospitality and tourism-related sectors which accounted for 24.4 per cent of the services sector or 14 per cent of GDP in 2020. — Bernama