KUALA LUMPUR (Oct 29): The country's economic growth is expected to accelerate to 5.5%-6.5% in 2022 from 3%-4% in 2021, boosted by the continuation of the various stimulus and assistance packages to combat Covid-19.
The growth trajectory in 2022 will also be based on expectations of further expansion in global and domestic activities, fuelled by broader vaccine coverage and a further improvement in goods trade amid a slower recovery in services trade, said the Ministry of Finance in its 2022 Fiscal Outlook report.
For 2021, the gross domestic product (GDP) growth of 3% to 4% represents a rebound from the economic contraction in 2020, which saw it contract 5.6% due to the Covid-19 pandemic.
The domestic economy expanded 7.1% in the first half of 2021. The economic growth is expected to continue especially in the fourth quarter with the reopening of more economic and social sectors.
"Nevertheless, the favourable outlook is predicated on other factors, including the successful containment of the pandemic, effective National Covid-19 Immunisation Programme implementation, and strong global economic prospects," cautioned the report.
All expenditure items of the GDP are expected to see growth, said the report. Domestic demand is expected to expand by 6.6% in 2022.
Private consumption is expected to anchor domestic demand recovery, as it is forecast to increase by 7.3% in 2022, compared with 4.1% in 2021.
The expansion is anticipated to be supported by higher disposable income and better employment prospects, following a broad-based economic recovery. Improvement in consumer confidence and positive wealth effect on the back of a recovery of the stock market are also anticipated to stimulate private consumption spending.
Private investments in 2022 are expected to increase 2.6% compared with 1.4% in 2021. This comes as the government intends to move to promote high quality investments in high-technology, high value added, knowledge intensive and innovation-based industries.
Meanwhile, public expenditure is expected to increase 7.3% in 2022 compared with 1.6% in 2021. This will be led by public investments, which will see growth of 24.1% compared with the projected 1.9% contraction in 2021.
The increase in public investment will stem from the capital layouts of projects, such as the continuation of large-scale transportation projects, such as the Mass Rapid Transit Line 2 (MRT 2), LTR3, Johor-Singapore Rapid Transit System and Pan Borneo Highway. It also will see new projects such as MRT3 and upgrading of Klang Valley Double Track Phase 2.
There is also expectation of stronger external demand, especially for the electrical and electronics (E&E) products and major commodities, seen to support the surge in exports, which will help maintain a surplus in the current accounts.
Gross exports are expected to increase by 1.5% across all sectors in 2022 while gross imports are forecast to increase by 1.7% on account of higher demand in intermediate, capital and consumption goods.
The country is also forecast to record a current account surplus of RM55.6 billion, or 3.5% of gross national income, which is in line with continuous recovery in industrial and investment activities.
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