Malaysia will not face stagflation but must embrace structural reforms for economic recovery - BNM governor

KUALA LUMPUR: Malaysia will not face stagflation despite rising global inflation, with 2022 GDP growth expected to range between 5.5 per cent and 6.5 per cent.

However, Malaysia must embrace structural reforms to foster dynamism, seize emerging growth opportunities and secure a more durable post-pandemic economic recovery, according to Bank Negara Malaysia (BNM) governor Datuk Nor Shamsiah Mohd Yunus.

Nor Shamsiah emphasised that the central bank remained firm on next year's GDP projection, supported by gradual easing or containment measures, which would further support the resumption of economic activities.

"The growth projection would also premise on several factors, namely continued recovery in the labour market as economic activity improves, a pickup in production and construction activities driven by selected key projects, continued policy support and the growth in exports and underpin by strong external demand," she said in a joint press conference by BNM and the Department of Statistics Malaysia (DOSM) on Malaysia's third-quarter 2021 GDP performance on Friday.

She elaborated that the central bank does not see any indications of a broad based price increase or excessive price pressures as the price pressures are to remain moderate in 2022. driven by spare capacity in our economy.

"Even if some businesses choose to adjust their prices and offer more competitive wages to attract workers as people begin to spend again, there is still room for improvement in both growth and employment.

"I understand that demand-driven price pressures are a source of concern, but there are many factors that can affect the inflation outlook, both domestically and internationally. This includes the global commodity price developments as well as the risk of a prolonged supply disruption.

"We will continue to monitor this closely. I have previously stated that the stance of monetary policy will continue to be determined by incoming information and the implications for the overall outlook for inflation and domestic growth," she added.