KUALA LUMPUR: MARC Ratings Bhd projects a firmer real gross domestic product (GDP) growth of 3.9 per cent year-on-year (y-o-y) in the first quarter of 2022 (Q1 2022) amid accelerating economic recovery, despite external headwinds.
In a research note today, MARC Ratings said it anticipates growth to strengthen further throughout the next two quarters, accentuated by favourable base effects, supportive fiscal policies, the reopening of international borders and the lifting of other pandemic-related restrictions.
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"We foresee considerable private consumption growth in the coming months with pent-up demand and income support.
"Continued strength in the labour market supports this notion as we predict a lower unemployment rate at 4.0 per cent for 2022 (2021: 4.6 per cent)," the ratings agency said.
Despite this optimistic viewpoint, however, MARC Ratings said the main threats to growth cannot be ignored and these are not expected to dissipate anytime soon.
"Output growth will remain below potential amid the ongoing supply-side disruptions, which have led to higher input prices, labour shortages and a rapidly changing external outlook.
"Our headline inflation projection has been revised upwards to 2.7 per cent for 2022 (2021: 2.5 per cent), reflecting the intense supply-side inflationary pressures in the coming months despite active government intervention," it added.
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Furthermore, MARC Ratings said rising living and borrowing costs would "act as speed bumps to consumer demand”, notwithstanding government price control measures, the special Employees’ Provident Fund withdrawal and the rise in minimum wage to cushion the pain.
On the overnight policy rate, the rating agency opines that a second interest rate hike by Bank Negara Malaysia (BNM) in the second half of 2022 (2H2022) is "highly probable”.
"On closer examination of its latest Monetary Policy Statement (MPS), there is an increasing number of positive words such as ‘firmer’, ‘strengthen’ and ‘improve', implying BNM’s growing confidence in the domestic economy’s near-term prospects.
"Nevertheless, we expect that the eventual normalisation of monetary policy will be gradual, as reiterated in the MPS, to ensure sustainable economic recovery," it said. - Bernam