Bank Negara Malaysia Annual Release 2022: Laying a Future-Proof Foundation

“Slow and normalising” growth in 2023. The Malaysian economy will not be in recession. Following a strong expansion of 8.7% in 2022, Bank Negara Malaysia’s (BNM) estimate of between 4.0% and 5.0% (point estimates of 4.5%) in 2023, is in line with SERC’s estimate of 4.1%. 

Domestic demand is calling the shots. With exports expected to slow substantially, domestic demand will be holding the fort to deliver the expected economic growth for 2023. While the improvement in the labour market and wage growth will support consumer spending, we caution that still elevated inflation and cost of living as well as higher interest rates would take off some steam from household spending. Private investment growth, largely underpinned by investment in the manufacturing sector, will continue to expand moderately amid higher cost pressures and cautious global economic prospects. 

Both headline and core inflation are expected to moderate but remain elevated in 2023. Bank Negara Malaysia expects both headline and core inflation to vary between 2.8% and 3.8% in 2023 (3.3% and 3.0%, respectively, in 2021). Global cost environment has moderated, thanks to lower average prices of key commodities amid improving supply constraints and softening global demand. Inflationary pressures would ease in 2023.

The Monetary Policy Committee (MPC) will continue to calibrate the monetary policy settings that balance the risks to domestic inflation and sustainable growth. We expect the overnight policy rate (OPR) to return to its normalcy, taking it to 3.00% by end-2023.