Emr2022 en Ch0b

Key Highlights on
Economic Development and Outlook

Malaysia’s economy to grow between 4% and 5% in 2023
Real GDP growth (Annual change, %) Key drivers of growth in 2023 (Annual change, %)
8.7 Demand
4.4 5.0 +6.1% +6.0%

3.1
4.0 Private Gross Fixed
Consumption Capital Formation
2019 2020 2021 2022p 2023f Supply
-5.5 +5.0% +4.0%

p Preliminary
f Forecast Services Manufacturing
Various factors supporting growth, despite external and domestic headwinds

Major Contributors to Growth
Continued implementation of multi-year Further recovery in tourism activity
investment projects
Further improvement in Continued targeted policy measures

employment and income levels
Key Challenges
Slowing global economic and trade growth Elevated cost of living and input costs
Elevated inflation Cost and price pressures dampening spending by
Tight monetary policy and financial conditions consumers and firms
Headline and core inflation to average between 2.8% and 3.8% in 2023
Headline inflation (Annual change, %)
3.3 3.8
2.5 Factors affecting inflation outlook
2.8
0.7
Moderating global cost environment
Lower key commodity prices
2019 2020 2021 2022 2023f
-1.2 Elevated core inflation

Core inflation (Annual change, %) Firm domestic demand and improvement
3.0 3.8 in labour market
1.5 2.8
1.1 Gradual subsidy rationalisation
0.7 Revision in electricity surcharge for selected
industry participants
2019 2020 2021 2022 2023f
f Forecast
Source: Department of Statistics, Malaysia and Bank Negara Malaysia estimates

Key Highlights on
Box Articles
Rebuilding Retirement Savings and Financial Safety Nets in Malaysia

Necessary reforms to ensure Malaysia’s retirement saving framework is future-ready
Gaps in the current retirement saving framework Saving our tomorrow: Reforms for a better future
Sufficiency: Savings adequacy Ringfencing of retirement funds

• Low number of EPF members meeting • Allow for greater accumulation of
the Basic Savings threshold savings, alongside structural reforms to
boost income
Unlocking the potential of data

Exclusion: Access to social protection
• Universal registration into EPF and
• Limited access to social protection for SOCSO to identify needs for uncovered
workers in the informal sector segments
• Enable linking of cash assistance with
upskilling programmes
Adaptability: Gaps in old-age assistance Enhancing old-age assistance and

and labour market frictions labour participation
• Insufﬁciency of old-age assistance • Linking old-age assistances to
• Lack of job opportunity for the standard of living
old-age groups to re-enter job market • Hiring incentives for old-age workers
An orderly transition to a green economy will allow Malaysia’s

growth to become more resilient, sustainable and inclusive
A suite of mitigation measures can be considered Regional countries are moving ahead to
to encourage an orderly transition implement climate policies
Policies
Legislate Climate Change Act
Develop sectoral pathways (LT-LEDS) Policy already in place Net-Zero
Regulation Policy currently under National Policy Carbon
Carbon
planning Net Zero Framework Market
Tax
No policy in place Target & Mechanism
Legislation
Rationalise fossil fuel subsidies and
redirection to renewable energy Singapore
Price Reforms By 2050
Indonesia
By 2060
Prioritise low carbon procurement
Leadership and Thailand
Governance By 2065
Scale up R&D and commercialisation Malaysia

of green technologies By 2050
Investment
Philippines 75% below
Promote public awareness on -
BAU by 2030
carbon capture, palm-based Source: Various news ﬂows, Grantham Research Institute
Awareness and
feedstock and bio-based solutions on Climate Change and Environment
Capacity Building
Key Highlights on
Box Articles
Exchange Rate Pass-Through to Inflation in Malaysia
Although the ringgit has depreciated, impact to …in part reflecting country-specific
inflation has been quite contained… factors
Factors that limit exchange rate pass-through:

A 5% change in ringgit1/
1. Low share of imports in consumption
and production
2. Stable firm pricing behaviour
3. Policy intervention such as subsidies and

price ceilings
Core inflation2/ to change

by 0.2 ppt over a year3/
1/
Ringgit here refers to RM/USD.
2/
Core inflation refers to core consumer price index (CPI) which excludes volatile items (e.g. fresh food) and price-administered
items, as well as direct impact from consumption tax policy changes.
3/
On average over 2006 to 2022.

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Key Highlights on

Economic Development and Outlook

4.4 5.0 +6.1% +6.0%

2019 2020 2021 2022p 2023f Supply

-5.5 +5.0% +4.0%

Various factors supporting growth, despite external and domestic headwinds

Further improvement in Continued targeted policy measures

-1.2 Elevated core inflation

Source: Department of Statistics, Malaysia and Bank Negara Malaysia estimates

Rebuilding Retirement Savings and Financial Safety Nets in Malaysia

Sufficiency: Savings adequacy Ringfencing of retirement funds

Unlocking the potential of data

Adaptability: Gaps in old-age assistance Enhancing old-age assistance and

An orderly transition to a green economy will allow Malaysia’s

Scale up R&D and commercialisation Malaysia

Factors that limit exchange rate pass-through:

2. Stable firm pricing behaviour

3. Policy intervention such as subsidies and

Core inflation2/ to change

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