KUALA LUMPUR, Sept 1 — RAM Ratings has upgraded Malaysia’s full-year GDP growth to 6.8 per cent (from 5.8 per cent) on the back of a strong recovery while maintaining its forecast of 4.5 per cent to 5.5 per cent for 2023.

In its Economic Update 2022 report released today, the rating agency expects the robust recovery charted by the Malaysian economy in the first half (H1) of 2022 (6.9 per cent y-o-y) to pave the way for full-year growth prospects to surpass its earlier expectations and 5.3 per cent to 6.3 per cent guided by Bank Negara Malaysia.

"Economic performance in H1 was buoyed by strong domestic demand (8.6 per cent y-o-y) as the country began its transition into an endemic phase.

"Consumption rebound was also enabled by a steady recovery in the labour market, which saw the unemployment rate fall to 3.8 per cent in June,” it said.

Exports, another key contributor, grew 6.1 per cent y-o-y in volume terms in H1 despite ongoing global supply chain disruptions, noted RAM.

The country’s overall output in 2022 will be only 4 per cent higher by RAM’s estimates compared to the 2019 level, it said, adding this and the negative output gap suggests there is still slack capacity to drive growth next year.

"We continue to be cautious of looming headwinds that could intensify further in the coming months and into 2023 as global inflation stays persistently high and global central banks remain focused on achieving price stability through aggressive interest rate hikes.

"These developments, along with China’s ongoing economic slowdown, are expected to dampen global demand and economic prospects moving ahead,” it said.

Closer to home, expectations of another overnight policy rate (OPR) hike in September and high food inflation could blunt domestic consumption, it added. — Bernama