KUALA LUMPUR (Reuters) – Malaysia’s economy returned to growth in the fourth quarter last year with the central bank expecting the recovery to continue this year despite risks of further disruptions caused by the coronavirus pandemic.
Gross domestic product rose 3.6% in the October-December period, Bank Negara Malaysia (BNM) said on Friday, faster than the 3.3% rise forecast in a Reuters poll and up from a 4.5% decline in the previous quarter.
Malaysia’s full-year economic performance expanded 3.1% in 2021, rebounding from the 5.6% drop in 2020, the country’s worst annual performance since the 1998 Asian Financial Crisis.
BNM said Malaysia’s economic recovery was expected to continue in line with improved global and domestic demand.
Risks remain to the downside, however, mainly due to concerns over “severe and vaccine-resistant COVID-19 variants” that could trigger new containment curbs “globally and domestically,” BNM Governor Nor Shamsiah Mohd Yunus told a news conference.
Malaysia has seen a resurgence in COVID-19 cases in recent weeks, mostly from the highly transmissible Omicron variant of the coronavirus.
However, the government has vowed not to reimpose lockdowns amid a ramped-up COVID-19 inoculation programme.
Nearly 80% of the country’s 32 million population has received at least two doses of COVID-19 vaccine, while more than a third has received a booster.
Capital Economics analyst Alex Holmes said in a note the impact of new infections should be relatively mild and brief given high vaccination rates.
The economic recovery will also likely be boosted by the reopening of international borders, with Malaysia planning to end mandatory quarantine for inbound travellers on March 1, he said.
Nor Shamsiah said headline inflation is expected to remain moderate this year and denied speculation Malaysia was experiencing signs of hyperinflation or stagflation.
She said the current monetary policy stance was considered appropriate and accommodative and that BNM was mindful of any premature withdrawal of policy support.
Last month, the central bank left its key interest rate unchanged at a record low of 1.75% to support continued recovery.
Malaysia is projecting 2022 economic growth of between 5.5%-6.5%.
Any revisions to the official outlook will be announced on March 30, along with the central bank’s decision on digital banking licenses, Nor Shamsiah said.
BNM has received 29 bids for the licenses so far, with only five expected to be issued.
($1 = 4.1840 ringgit)
(Writing by Rozanna Latiff; Editing by Sam Holmes)