Malaysia expects economic slowdown in 2023

Malaysia expects its economy to grow at a slower pace next year compared to 2022, said its finance minister Tengku Zafrul Aziz. This comes as its major trade partners also face economic headwinds. Multiple media reports including The Star, The Edge Markets, and Reuters said the country will need to prepare itself for the possible slowdown in major global economies in 2023.

Quoting the finance minister, The Edge Markets said all countries globally will be impacted as major economies such as the US, China and Europe are expected to slow down.

While the country is not in a currency or financial crisis, Tengku Zafrul said the movements of currencies globally has an influence on the ringgit. Although the ringgit has fallen, he added that other currencies have also experienced the same or even in greater measure, such as the British pound and Japanese Yen, The Star said.

Nonetheless, he said Malaysia is "not in a crisis", adding that GDP continues to grow and that inflation levels "were in check". According to Tengku Zafrul, these factors do not indicate an economy which is in crisis.

The minister plans to use the upcoming Budget 2023 to address the possibility of an economic slowdown. In fact, Budget 2023 will continue to focus on maintaining the country's economic recovery momentum as well as its structural reform agenda, The Edge Markets said. It also hopes to boost the resilience of businesses and Malaysians against any possible headwinds in future, especially those resulting from geopolitical uncertainty and climate change.

On the topic of geopolitical uncertainty, Tengku Zafrul explained that US-China tensions, the Russia-Ukraine war, and China's zero COVID-19 policy have impacted the supply chain globally. All these cast a gloomy outlook for Malaysia's economy in the fourth quarter, The Edge Markets said, and according to Tengku Zafrul, these will also "continue to put pressure on inflation rates and food security" globally, including at home.

Separately, a recent report by Bain & Company and Meta said Southeast Asia seems to be a relatively stable playing field while the world continues to face uncertainty in growth. By the end of 2023, Southeast Asia is expected to maintain its projected growth at 5.1% compared with other markets such as the US (1.3%), the EU (2.1%), and China (4.7%).

Foreign direct investment in Southeast Asia will also increase. FDI accounted for a greater proportion of total investment in 2021, at 17% versus 15% in 2015 and just 9% in 2009. According to the report, the steady rise in foreign investment is a testament to investors’ confidence in Southeast Asia and is fueling the growth of new technologies such as fintech.

Related article:
MY predicts 'positive GDP expansion' but agency leaders are still bracing for recession impact