Rising Commodity Prices Give A Boost To Malaysia’s Budget
This story appears in the June 2022 issue of Forbes Asia. Subscribe to Forbes Asia
This story is part of Forbes’ coverage of Malaysia’s Richest 2022. See the full list here.
Russia’s war in Ukraine, global supply chain issues and China’s slowing economic growth are putting a strain on Malaysia’s globally linked economy, where international trade accounts for nearly 120% of GDP. The central bank unexpectedly lifted its benchmark interest rate in mid-May to tamp down inflation amid rising food and fuel costs.
The global headwinds, however, have a silver lining—skyward oil and commodity prices are buoying the nation’s export receipts and government revenues. With an improved balance sheet in hand, the government is expected to continue infrastructure spending, which will help fuel the economy. GDP is projected to expand 6.1% in 2022, 5% in 2023 and 4.5% in 2024, a robust achievement in an era of slower global growth.
Higher government revenue should also give Kuala Lumpur more room for fiscal maneuvering. Although the budget deficit as a percentage of GDP is expected to come in around 6% this year, it’s forecast to drop to 4.2% by 2024. Covid-19 restrictions have eased with a policy shift toward living with the virus, leading to a rise in private consumption.
Wealth disparity remains an ongoing issue, and the government is well aware of inflation’s impact on households. In a special meeting in January, the National Action Council on Cost of Living addressed the rising costs of essential goods by lowering the maximum retail price of chicken. Three months later the government introduced measures to control food prices and prevent profiteering during Ramadan and Hari Raya festival celebrations, and from June 1 banned chicken exports to increase domestic supply.