Rozanna Latiff & Mei Mei Chu

KUALA LUMPUR, (Reuters) – Malaysia’s economy grew at a faster pace during the first quarter thanks to a recovering market and a more stable labour market. This is as the global economy recovers from the coronavirus epidemic. The central bank stated Friday.

The January-March period saw a 5% increase in gross domestic product, which was faster than the 4% forecast in Reuters poll. This is an improvement from the 3.6% quarter.

Nor Shamsiah Mohd Yunus (Bank Negara Malaysia) stated that projections by the central bank have taken into account the Russia-Ukraine War. He said growth would continue to be supported through continued domestic and international demand.

There are downside risks, including Russia invading Ukraine, a tight lockdown in China to stop the COVID-19 epidemic, and prolonged supply chain disruptions.

According to her, “Although there are downside risks on the global stage, we remain confident in our growth trajectory” and she stated at a press conference that Malaysia is not facing any type of recession.

BNM’s 2022 forecast of economic growth was maintained at between 5.3% and 6.3%. It had previously been downgraded by March.

Malaysia, the country that has suffered the worst COVID-19-related outbreaks in its region, lifted the majority of its coronavirus vaccinations. The reason? Infection rates are slowing down due to an intensified vaccination program.

Unexpectedly, Wednesday’s benchmark interest rate was raised to 2.00% by the central bank from 1.75%. It had been historically low at 1.75%. The reason for the unexpected increase is a stronger domestic growth path and inflationary pressures due to the conflict in Ukraine as well as disruptions in global supply chains.

“If positive growth trajectory continues and barring any unexpected shocks, it would be appropriate for the MPC (Monetary Policy Committee) to further reduce the degree of monetary accommodation,” she said.

BNM did not alter its earlier projection of headline inflation to indicate that it would average between 2.2% and 3.2%.

Marzunisham Omar, the Deputy Governor, stated that there are some price pressures on foodstuffs but Malaysian inflation is still moderate when compared with other countries.

There is some room for improvement in the economy. Marzunisham stated that price controls for fuels and food products help to reduce price pressures, but added that long-term solutions were needed to curb inflation.