KUALA LUMPUR: Malaysia's gross domestic product (GDP) is expected to expand 3.6% in 2021, before accelerating to 5.6% in 2022, according to HSBC Global Research.

       “We believe the Malaysian economy has one of the brighter outlooks in the region,” it said in a report.

       HSBC said Malaysia had one of the highest vaccination rates in Asia, allowing a high degree of resilience.

       “While restrictions may be re-imposed, we believe the government will likely opt for highly targeted measures as opposed to lockdowns,” it added.

       In addition, HSBC said Malaysia was currently attracting the highest share of FDI commitments (% of GDP) in Asean, overtaking Vietnam.

       “This bodes well for the future of manufacturing. Malaysia’s manufacturing outlook remains impressively strong,” it said.

       The research house said the lockdowns appeared to have created a substantial backlog that believed would drive Malaysia’s export growth well into 2022.

       “As the labour market strengthens, core inflation may gradually trend higher, approaching 2% by the end of 2022, thus allowing Bank Negara to initiate a gradual tightening process in the second half of 2022.

       “We expect a total of 100 basis points of rate hikes over 2022 and 2023,” HSBC said.

       “Fiscal policy is expected to remain expansionary in 2022 with a budget deficit target of 6.0% of GDP, compared to a targeted deficit of 6.5% in 2021,” it added.

       On ringgit, HSBC said the USD-MYR was hovering near its year-to-date high due to various external challenges.

       “There are still a lot of uncertainties, but we believe the undervalued ringgit can recover in 2022 as Malaysia’s economy emerges from a “double-dip” recession,” it said. HSBC Economics is optimistic about Malaysia’s consumption prospects and exports outlook.