IMF Staff Completes 2022 Article IV Mission with Malaysia
IMF News, February 13, 2022
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Bibliographic details
- Published: February 13, 2022
Mission overview and timing
- IMF team led by Mr. Lamin Leigh conducted virtual discussions for the 2022 Article IV Consultation with Malaysia during January 24-February 9, 2022.
- End-of-Mission press release dated February 13, 2022; IMF team expected to present Staff Report to the Executive Board in April 2022.
- Statement clarifies views are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.
Macroeconomic performance and outlook
- Real GDP growth in 2021: 3.1 percent.
- Growth projection for 2022: about 5 ¾ percent.
- Inflation projection: about 2½ percent.
- Recovery characterization:
- Set for a gradual recovery.
- Uneven recovery with sizeable economic slack.
- Output likely to remain well below potential.
- Downside risks include possible re-intensification of the pandemic with vaccine-resistant variants.
- Sectoral dynamics:
- Export-oriented manufacturing sector underpinned growth.
- Agriculture and contact-intensive sectors remained hard hit.
- Pent-up domestic demand and continued strong external demand expected to drive 2022 growth.
Fiscal policy findings and recommendations
- Near-term:
- Recommend additional near-term targeted fiscal support towards vulnerable and hard-hit segments of the economy and productive investments.
- Near-term support should be nimble and increasingly targeted to buttress recovery, minimize economic scarring, protect vulnerable populations, and scale up productive investments in line with authorities’ spending priorities.
- Medium-term:
- Authorities’ commitment to medium-term fiscal consolidation is welcome.
- Recommend a credible, specific, growth-friendly, and clearly communicated consolidation strategy once recovery is entrenched to rebuild fiscal buffers, preserve fiscal sustainability, and reduce fiscal risks.
- Consolidation should be underpinned by budgetary reforms and supported by robust fiscal governance practices.
Monetary and financial sector recommendations
- Monetary policy:
- Current accommodative monetary policy stance is appropriate.
- Monetary policy should remain data dependent.
- Exchange rate flexibility should be the first line of defense against volatile capital flows.
- Financial sector support:
- Financial sector support measures should continue to be more targeted and unwound as the recovery becomes entrenched.
- Close attention should be provided to financial stability risks as support measures are progressively unwound.
Structural reforms and policy priorities
- Recommend coordinated and targeted structural reform policies to:
- Address long-standing structural challenges.
- Limit economic scarring.
- Boost productivity.
- Address inequality.
- Enhance economic resilience and meet aspiration of a “Prosperous, Inclusive and Sustainable Malaysia.”
- IMF team supports the thrust of the Twelfth Malaysia Plan, including:
- Boosting the digital economy.
- Elevating the level of education.
- Enhancing broad-based productivity drivers.
- Accelerating governance and anti-corruption reforms.
- Reinvigorating the tourism sector.
- Adopting comprehensive climate change policies.
Communication and next steps
- IMF team thanked officials of the Government of Malaysia and Bank Negara Malaysia, other public institutions, private sector, and civil society for discussions.
- IMF team will prepare a Staff Report and expects to present it to the Executive Board of the IMF in April 2022.
IMF Staff Completes 2022 Article IV Mission with Malaysia — Press Release No. 22/34 (February 13, 2022).