PETALING JAYA: Domestic demand this year is projected to contribute the highest percentage to gross domestic product (GDP) in Malaysia over the last two decades, according to the Institute of Chartered Accountants in England and Wales (ICAEW).
Based on its Economic Insight Forum Q4’22 report, it said that however, just as economic activity is picking up with businesses adjusting to new ways of working and benefitting from pent-up customer demand, it now sees spiralling energy and input costs, high inflation and weak consumer confidence leading to a global recession.
“International travel to Southeast Asia is also expected to see less of a recovery in 2023 compared to the South Asia and Oceania regions. Due to Malaysia’s GDP being relatively less dependent on net trade and tourism compared to other emerging economies in Asean, it is projected to also be less impacted by exogenous factors and the global recession being forecast next year.
“Nonetheless, Malaysia’s has one of the highest gross government debt to GDP ratios in the region. Given that the budget deficit is not projected to drop by much, there is limited fiscal space for policy offsets and GDP growth in Malaysia is projected to shrink from 9.2% in 2022 to 2.7% in 2023,” it said in a statement on Dec 7.
Despite the unpredictability of lockdowns and extreme measures to curb infection rates in China, it said China is still expected to provide some boost to the region’s economy after a steady increase in personal consumption expenditure since the peak of the pandemic.
The institute opined that across all Asian countries, the growth in GDP has significantly slowed down. Among these countries, Singapore stood out with the slowest projected growth of 0.7%. In addition, Singapore is the only country to witness a declining growth trend for the past three years since 2021.
Meanwhile, it said that China’s plus one strategy, which involves the diversification of business investment and supply chain ecosystems, have proved vital to the growth of Asean’s economy.
“Placed favourably in the ecosystem diversification, Malaysia, is well-placed to pick up mid- to high-value supply chain systems with Indonesia looking to catch on aggressively. In addition, countries like Vietnam remain a paramount source of labour-intensive manufacturing and production. As such, Asean is expected to still see promising growth in years to come,” it said.