The economic and global worries of 2022 are certainly spilling over into 2023 as the war in Ukraine is still raging, supply disruption remains an issue and central banks are still battling with rising inflationary pressure. The rise in key interest rates globally will remain a theme for 2023 and its impact on the global economy remains a concern for both the IMF and the World Bank, as seen from the lowered GDP estimates for this year.
The key theme for the global economy, other than inflation and interest rates, is the opening up of the Chinese economy to the world. After years of lockdown, China’s outbound investments and tourism-related activities will be the real game changer for ASEAN as well as the global economy, provided China does not export Covid-19-related viruses to the rest of the world.
While central banks may still raise rates this year, the pace of increase will be much slower than in 2022 as inflationary pressure is seen easing. For Malaysia, while there are valid reasons for BNM to hold the Overnight Policy Rate at 2.75%, the market seems to be pricing in expectations that the central bank may raise the rate this year, possibly in the March Monetary Policy Committee meeting which would take the OPR to 3.00%, coming close to the level of 3.25% last seen four years ago in 2019.
Riding on the strong economic momentum in 2022, the Malaysian economy is expected to sustain decent growth of 4% in 2023, given the global economic challenges, inflationary pressure, and higher domestic borrowing cost. With the new unity government in place, all eyes will now focus on the upcoming re-tabling of the 2023 Budget, which will likely not only focus on the year’s income and expenditure projections but also provide a roadmap for Malaysia’s journey over the next five years under the leadership of the 10th Prime Minister, Datuk Seri Anwar Ibrahim.
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