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Malaysian Economy: Economic Growth and Dipping Inflation Rates

In 2022, the Malaysian economy grew at a pace of 8.7%. In accordance with market estimates, the nation's annual inflation rate dipped from 3.8% in December 2022 to 3.7% in January 2023. The decrease in the cost of transportation and food and non-alcoholic drinks was the key reason why it was the lowest reading since June 2022. Visit: https://bit.ly/40lIuc3

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Malaysian Economy: Economic Growth and Dipping Inflation Rates

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  1. Malaysia Economy

  2. Malaysia Economy - Overview • Malaysia is the fourth largest economy in Southeast Asia and is the 39th largest in the world (as of 2021). It is a newly industrialized market economy that has grown steadily in recent years. • The country saw its Gross domestic product (GDP) growth rising by 4.3% in 2019 after growing 4.8% in 2018. This was backed by several factors, including improvement in its labour market, sufficient spending on infrastructure, a pro-cyclical budget, and growing global demand for oil and gas, and electronics.  

  3. Malaysia - GDP • The impact of the pandemic pushed the economy into negative territory, recording a 5.6% contraction in 2020. In 2021, GDP growth rebounded to 3.1% and a year later GDP rose to a 22-year record high of 8.7%. • However, for 2023 the International Monetary Fund (IMF) cut its projection to 4.4% from the previous prediction of 4.7%. • In 2021, the unemployment rate rose marginally to 4.6% from 4.5% in 2020, led by the reopening of the nation’s economy. In 2022, it averaged lower at 3.8%.

  4. Malaysia - GDP (Source: IMF WEO January 2023 Update)

  5. Currency and Central Bank • Malaysia’s official currency is the Malaysian ringgit or RM, which is divided into 100 sen. • To tame inflation, BNM has increased the overnight policy rate (OPR) four times in 2022 to 2.75% and analyst expect further increases in 2023. • The central bank in November 2022 said headline inflation is likely to have peaked, with an annual inflation rate of 4.0% in November and October 2022. As per the IMF, Malaysia’s inflation is projected to reach 2.8% in 2023.

  6. Industry and Trade Malaysia’s economy has long transitioned from an agricultural-centric phase in the 1960s into an industrial and services-driven one. Healthcare services, transport, distributive trade, and tourism are the main drivers of its service sector. It accounts for 51.55% of the country’s GDP in 2021 and employed 63% of its labour force. 

  7. Industry and Trade •  Malaysia’s industrial sector makes up over 37% of the GDP and provides 26.8% of the workforce. • Agriculture employs 10.5% of Malaysia’s labour force. The country is still one of the top producers of palm oil, tropical wood, and rubber. However, its agricultural sector only contributes 7.1% of the GDP (as of 2021). • Malaysia currently ranks 24th in total exports globally, with integrated circuits, refined petroleum, petroleum gas, semiconductor devices, and palm oil as its main export products.

  8. Stock Exchanges Previously known as the Kuala Lumpur Stock Exchange, Bursa Malaysia is the sole stock exchange of Malaysia. In 2006, Bursa Malaysia partnered with FTSE Group to improve its previous Kuala Lumpur Composite Index (KLCI) and develop its current major index, the FTSE Bursa Malaysia KLCI, which is made up of the 30 largest listed companies based on market capitalisation.  

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