Kuala Lumpur, 19 March 2021 – The executive board of the International Monetary Fund (IMF) has concluded the Article IV consultation with Malaysia. They stated that the Malaysian economy is set to recover in 2021, with growth projected at 6.5 per cent. This will be driven by a strong recovery in manufacturing and construction.
The recovery is expected to be uneven across sectors, resting on an improvement in both domestic and external demand. Inflation would recover to 2 per cent and the current account surplus is on course to decline as demand for pandemic-related products starts to recede and the rebound in domestic demand raises imports.
An intensification of the pandemic and materialisation of other risks could derail the recovery. A protracted spread of the virus could prompt the authorities to tighten health and physical distancing measures, with negative impact on growth.
On the upside, deployment of COVID-19 vaccines could raise growth.
On the downside, Malaysia’s open economy is vulnerable to escalating trade tensions and weaker-than-expected growth in trading partners. Domestic policy uncertainty could also dampen business confidence and investment, with negative impact on economy activity.
IMF executive directors welcomed, among others, the Malaysian authorities’ well-coordinated policy response to the pandemic. Together with sizable buffers, this has helped mitigate the macro-financial impact of the crisis.
They observed that a strong recovery in 2021 remains subject to considerable downside risks and noted that macroeconomic policies should remain supportive until the recovery is fully entrenched.
– Construction+ Online