In 2021, Malaysia's GDP showed mixed dynamics: in the second quarter, GDP grew by 16.1% compared to the same period of the previous year, after which it decreased by 4.5% in the third quarter of 2021. In the fourth quarter, GDP again showed growth of 3.6%, which made it possible to achieve an annual growth of 3.1% after falling by 5.6% in 2020. The observed uneven growth during 2021 was caused by various challenges for the country, primarily due to the ongoing pandemic, and, as a consequence, the introduction of restrictions and the fall domestic demand and business activity.
It is expected that the lifting of restrictions imposed due to outbreaks of a new strain of coronavirus in 2021, the opening of borders and government support will contribute to the recovery of domestic demand in 2022 and GDP growth is expected to reach 5.6%. However, the positive aspects (narrowing the gap between the recovery in services and industry, reducing supply chain disruptions, increased infrastructure spending and increased FDI inflows, etc.) are overlaid by a slowdown in global trade due to the ongoing strict quarantine restrictions in China, which will eventually continue to weaken external demand, exacerbating disruptions with supplies in the world. Malaysia is at risk both because of slower import demand from China and because of the country's dependence on Chinese goods used in manufacturing. In addition, there is a risk that the rise in world commodity prices and the subsequent increase in costs may lead to the delay or cancellation of projects (the number of approved foreign investments increased by 225% in 2021 or 68% of the total volume of approved investments in 2020).
According to the IMF, inflation reached 2.5% in 2021. Moreover, the greatest inflationary pressure was noted during the 4th quarter of 2021, when inflation increased from 2.5% in August to 3.2% in December. The main factor in the increase in inflation was the increase in food prices as a result of the damage caused by the flood in December 2021. Among non-food products, utilities and fuels have become the leaders in price growth. In 2022, in order to stabilize inflation, the Malaysian Government announced the allocation of subsidies in the amount of more than 680 million ringgit ($157.2 million). To support producers of essential goods, including rice and meat products. Government subsidies for electricity and fuel, as well as administrative controls on the prices of individual foodstuffs, will help protect households from higher levels of world commodity prices. In addition, according to expectations, the economic recovery will continue to contribute to an increase in prices for services and goods related to tourism. According to forecasts, in 2022 the consumer price index will reach 2.7%-3.0%.
The targets of the Malaysian economy, in accordance with the development plan for 2021-2025: annual GDP growth of 4.5–5.5% per year, micro, small and medium-sized enterprises should provide 45% of GDP and 25% of all exports by 2025, labor productivity growth of 3.6% annually, increasing the share of e-commerce in GDP from 6.2% to 10.5%, an increase in the share of wages in GDP from 37.2% to 40%, an increase in the average monthly household income from 7,160 ringgit (~ 1.6 thousand US dollars) to 10,065 ringgit (~ 2.3 thousand US dollars). USD), an annual increase in exports of agricultural products by an average of 4.8% while maintaining the leading positions of palm oil and products based on it, reducing the intensity of greenhouse gas emissions by 45% to GDP by 2030 compared to the 2005 level in accordance with the Paris Agreement, ensuring Internet accessibility for 100% of households and 100% 4G network coverage in localities.
