AN UNCERTAIN GLOBAL ECONOMIC OUTLOOK FY2022 presented a challenging operating environment, with supply chain bottlenecks persisting1 and the ongoing RussiaUkraine conflict resulting in energy and raw materials price spikes2. These factors have in turn contributed a pessimistic outlook on the strength of the global economies, and a recession is widely anticipated to be imminent. In view of these uncertainties, the World Bank has predicted that global growth will be sluggish in 2022, falling from 5.7% to 2.9%, with the world’s advanced economies in particular set to suffer3. This confluence of factors will have both positive and negative impacts on our businesses. While economic uncertainty will depress the appetite of our customers to undertake large-scale projects, the relative weakening of the world’s developed countries offers us an opportunity to increase market share across our business divisions. MALAYSIAN ECONOMY DISPLAYING RESILIENCE On the domestic front, Malaysia recorded strong economic growth of 6.9% in the first half of 20224, with Q2 of 2022 in particular seeing an 8.9% jump in quarter-on-quarter GDP5. The Ministry of Finance Malaysia (MoF) during the tabling of Budget's speech 2023, has revised the country's economy to grow between 6.5% and 7.0% in 2022, with a slight contraction forecast at 4.0% to 5.0% in 2023. The relative vitality of the economy is driven by Malaysia’s status as a net exporter of commodities, its importance in global manufacturing supply chains, and resilient domestic demand for goods and services6. However, the economy remains highly susceptible to the potential global economic downturn and continuing supply chain disruptions. On a note of caution, the country’s inflation rate has risen sharply in the second and third quarters of 2022, in line with the global trend, reaching a 16-month high of 4.7% in August 20227. In response, Bank Negara Malaysia (“BNM”) has raised the Overnight Policy Rate (“OPR”) by 25 basis points to 2.50%. This rate is still below the OPR maintained during the COVID-19 pandemic, indicating that BNM has the flexibility to execute further deflationary monetary policies in response to changing economic conditions. MoF forecasts the inflation rate to range between 2.8% and 3.3% in 202312. Global GDP Growth Rate 0.0 1.0 2.0 3.0 4.0 5.0 6.0 Per cent 7.0 World 5.7 2021 2022 2023 2.9 3.0 Advanced Economies 5.1 2021 2022 2023 2.6 2.2 Emerging Market and Developing Economies 6.6 2021 2022 2023 3.4 4.2 Malaysian GDP Growth Rate -5 0 5 10 15 20 1Q, 2021 2Q, 2021 3Q, 2021 4Q, 2021 1Q, 2022 2Q, 2022 2022f 2023f -0.5 -4.5 15.9 3.6 5.0 8.9 6.5 4.0 Source: The World Bank (2022), Global Economic Prospects – June 2022 DAGANG NeXCHANGE BERHAD 48 OPERATING ENVIRONMENT A. STRATEGIC REVIEW
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