Malaysia on track for 6% GDP growth in 2022: Maybank IB

AFTER a "bumpy, uneven and underwhelming" growth in 2021, Maybank Investment Banking (Maybank IB) is expecting the pace of Malaysia's gross domestic product (GDP) growth to quicken to 6 per cent in 2022.

In a report on Thursday (Dec 9), the research house said it anticipates a rebound in Malaysia's economy on the positive momentum of Malaysia's high Covid-19 vaccination coverage and ongoing vaccine booster roll-out.

In the view of its analysts, economic growth has broadened due to the relaxation of various pandemic-driven restrictions since July 2021, which aided sectors that were struggling to recover, such as services and construction.

Maybank IB is therefore expecting the KLCI (Kuala Lumpur Composite Index) to reach a double-digit earnings rebound in 2023, following a 2022 year-end target of 1,710, which represents 15 times forward earnings, or half a standard deviation point versus the mean.

The research house is therefore "overweight" on sectors including financials, hospitals as well as plantations while remaining selective on telcos, real estate investment trusts and logistics. It is "underweight" in the gloves sector.

Noting that overall macro policy remains pro-growth, its analysts assume Bank Negara Malaysia's overnight policy rate to stay at a record-low of 1.75 per cent well into 2022. Budget 2022 remains expansionary, they added, with a third consecutive year of budget deficit below 6 per cent GDP.

Having said that, the research team noted that Covid-19 still clouds the recovery process with Omicron being the latest variant of concern as its rapid emergence underscores downside risk to growth.

"The best-case scenario is (that the) Omicron variant turns out to be mild and manageable," said the team.

In the event the new variant causes another wave of Covid-19 infections, "our base case view is the adoption of localised and targeted containment measures amid protections from herd immunity".

Maybank IB said herd immunity would be "achieved via mass and booster vaccinations, as well as observations of healthcare protocols, safety measures and operating procedures" to "ensure sustained and broad - if not full and complete - economic reopening and permission for social activities".