BBEK4203

PRINCIPLES OF MACROECONOMIC

JANUARY 2023

NAME : PAVITHRA D/O SATHYASALAN

IC NO. : 970911-02-5346

MATRIC NO. : 970911025346001

NO. TEL : 013 - 8174266

LEARNING CENTRE : SUNGAI PETANI LEARNING CENTRE

INTRODUCTION

This report is made as needed for the completion of the macroeconomic subject. It
investigates profitable events for the last decade and their impacts on Malaysia’s profitable
performance. Asian Financial Crisis event is chosen simply because this event is arguably the
most influence influential Frugality event during the last decade. Analysis The analysis of
countries’ performances and conditions during the extremity (1997- 1998). Sources of
information are substantially gathered from internet exploration and applicable accouterments
similar to profitable journals and books. Data collected are anatomized and suppositions
drawn are grounded on my understanding of the macroeconomic subject. In October last
time, sanctioned vaticinations projected Malaysian economy to grow by5.5 to6.5 percent in
2022. Further recently, Bank Negara Malaysia has downgraded its vaticinations for the
country’s profitable growth in 2022 to 5.3 to 6.3 percent. This minor adaption of a bare 0.2
percent belies the misgivings generated by recent events that cloud the prospects of the
country’s continuing recovery in the coming months. These include the impact of the war in
Ukraine, the ongoing coupling of the Russian economy with the global economy, and
inflationary pressures in developed husbandry.

EXECUTIVE SUMMARY

 A lot of uncertainties are obscuring Malaysia's chances for a more sustained economic
rebound. In light of recent events, Bank Negara Malaysia's 0.2% modest downward
revision of Malaysia's economic growth prediction to 5.3-6.3% is a bit overly
optimistic.
 The onset of Covid-19's endemic phase will unquestionably boost domestic economic
activity, but the benefits from loosening limitations on the movement of people and
things may be less substantial than anticipated.
 There will undoubtedly be interruptions as a result of the war in Ukraine and Russia's
decoupling from major economies, which will likely cause the global economy to
weaken and lead to inflationary shocks.
 Despite the rising market, Malaysia's economy would undoubtedly be negatively
impacted by external factors.
  Notwithstanding the increasing market prices for certain of its commodities, such as
crude oil and palm oil, Malaysia's growth would likely be negatively impacted by the
external conditions.
 Food costs in particular are already beginning to rise as a result of inflation.
 If the Ringgit continues to decline as a result of increasing interest rates in the US,
these inflationary pressures are expected to worsen.
 Policymakers may need to tighten monetary policy even more if Malaysian inflation
increases, along with extra fiscal stimulus paid for by debt and petroleum royalties.

MALAYSIA will see weaker profitable growth at a4.1 estimated rate of8.5 from8.5 in 2022,
largely due to an interplay of weakening external terrain, new government narratives,
domestic inflation, and interest Socio- Economic Economic Research Centre (SERC) stressed
that other factors affecting the growth are moderating homogenizing of domestic demand,
dampening impacts of inflation and advanced cost of living and the lagged goods of interest
rate increases. SERCED Lee Heng Guie explained further that exports temperance would
reduce exports growth to1.8 in 2023 from26.5 in 2022 due to the dampening impact of
weakening global demand, easing prices of energy and goods, as well as challenges posed by
high base goods.

“The instigation for exports growth had softened between September to November 2022 due
to weakening demand of major manufactured goods analogous as electronics and electrical
products, chemical and chemical products, ministry, and lower crude oil painting oil and win
oil painting oil prices,” Lee told intelligencers at the briefing of Malaysia’s Quarterly
Economy Tracker( October to December 2022) and 2023 Outlook. The report indicated a
normalizing domestic demand at a more sustainable pace while ménage spending is
anticipated to homogenize towards its medium- term growth line in 2023 and 2024.
“Consumer spending’s growth is moving to sustainable situations due to homogenizing post-
Covid- 19 pent- up demand as cash backing measures analogous as the RM145 billion
workers Provident Fund pull out and loan repayment backing had ended.“either, copping
power is declining due to the impact of rising inflation and advanced cost of living. “In
addition, advanced interest rate (borrowing cost) for high debt borrower means that
consumers do not have important disposable income and must cut back on spending,” he said.
The good news, he said, is that the labor request has bettered to 3.6 as of the end of October
2022 with the labor participation rate nearing the pre-pandemic position.

Private investment will grow by 4 in 2023 from 5.8 in 2022 due to continuing investment in
the manufacturing sector and some sub-sectors in services sedulity, for illustration, the 5G
network and green investment in the telecommunication member. Malaysia’s inflation rate is
anticipated to hang between 2.8 and 3 this time with caption inflation to increase between 2.8
and 3.3 in 2023 following stable commodity prices and a gradual move towards targeted
grants medium. “With government focus on diving the impact of inflation and advanced cost
of living on the low- and middle-income homes, we anticipate targeted grants vindication will
be executed at a measured pace. “ Meanwhile, we maintain our view that Bank Negara
Malaysia will raise the interest rate by a fresh 50 base points to its Pre-Covid position at 3.25
in 2023 to guard macroeconomics stability,” he said. As analogous, Lee mentioned that the
Unity Government has to ensure a stable and good governance political system and a
profitable ecosystem, which is the pivotal precondition to rebuilding businesses and investor
confidence.

“In a broader sense, both Pakatan Harapan’s and Barisan Nasional’s edict address and give
structural results for the Rakyat’s enterprises about immediate profitable issues (cost of
living, income, and jobs), education, healthcare, and climate change-related impact. “At the
same time, governance and institutional reforms also featured prominently, emphasizing the
significance of reforming political and public institutions to ensure effective governance,
translucence, and responsibility of the new administration,” he said. “Both manifestos have
some notable common offerings though we believe that some enterprise can be executed
directly, in particular concerning people-centric measures to ease the impact of inflation and
advanced cost of living on B40 homes “We view positively the laid-out pledges to ensure
good governance practices and to take over institutional reforms. With a satisfying two-thirds
maturity, we hope that the Unity Government can front-weight as well as prioritize the
performance of governance and institutional reforms. Political reforms do not dodge any
fiscal costs compared to good and social reforms. “As the public and investors warrant
confidence and distrust, effective governance and credible institutional reforms are supposed
critical to perfecting state institutional capacity as the precondition to make suitable,
transparent, effectives and trust, as well as confidence in government and public institutions.
The effectiveness of political and profitable institutional reforms would not only have a
positive impact on profitable growth but also increase the position of investment because it
gives farther confidence to investors and businessmen and the business terrain is more
competitive for the profitable eventuality, the author continued. Institutions affect economy
through the creation of terrain necessary for profitable growth, substance, and development.

Figure 1: DOS’s Business Confidence Indicator and Real GDP Growth

Early 2022 surveys were enthusiastic about Malaysia's chances for development in 2022.
Economic activity was anticipated to improve in the first quarter of 2022, according to the
Business Confidence Indicator (BCI), which was released by the Department of Statistics in
late February 2022. (Figure 1). Although the floods in January and March 2022 are probably
going to have a short-term effect on growth in this quarter, they probably won't have a
significant influence on the rest of the year. On the other hand, two things will control the
economy's course in the upcoming months. It is anticipated that the start of the Covid-19
endemic phase, which started on April 1, 2022, will increase domestic sources of growth.
Nevertheless, negative and connected events overseas, such as the conflict in Ukraine and
inflationary pressures in wealthier countries, might dampen the growth brought on by the
Covid-19 endemic phase.

Figure 2 : Inflation Rate And Changes In Components of CPI

The periodic CPI values showed that Malaysia transitioned from a deflationary (-1.2 percent)
economy in 2020 to an inflationary one (2.5 percent) in 2021. Looking at the price changes in
the CPI factors, the inflation in 2021 was driven by sharp increases in transport and food
costs. (Figure 2) The increase in transport costs would have been advanced without energy
grants( for RON95 petrol and diesel). This can be seen from the added gap between the prices
for these energy products and the price of RON97 petrol (which is not subsidized) .( Figure
2) With the fairly high weightage of the transport and food costs in the CPI, the inflation rate
is likely to be advanced in Malaysia in 2022. Current inflation data indicate that while overall
inflation has been mild, food costs have increased dramatically. Comparing 2022 to 2021, the
price of food has risen by3.6 percent in January 2022,3.7 percent in February 2022, and 4
percent in March 2022.

Figure 3: Covid-19 Number of Daily New Cases and Death in Malaysia

FIGURE

Malaysia is presently witnessing its fifth surge of the Covid- 19 epidemic. The number of
diurnal new Covid- 19 cases in this current surge is more advanced than during former swells
(Figure 3) still, the number of diurnal new Covid- 19 deaths has remained fairly low
(compared to the number of new cases) About 79 percent of the country’s population have
been vaccinated with two boluses. This has urged the Malaysian government to relax the
control measures further. The country officially entered the Covid- 19 aboriginal phase
starting 1 April 2022.
 Figure 4: Covid-19 Daily New Cases and Mobility for Economic Activities

How important will the frugality be boosted by the perpetration of the aboriginal phase? In
proposition, an increase in population mobility for retail conditioning is likely to increase
private consumption. Though the aboriginal phase will impact domestic profitable exertion
appreciatively, the size of this impact is delicate to ascertain in any precise manner. For
starters, the mobility pointers for profitable conditioning similar as retail and work have been
adding since June 2021 (Figure 4). It formerly peaked in late December 2021, before
declining slightly – substantially probably due to the cataracts and seasonal goods. Hence, the
domestic profitable earnings from transitioning to the Covid- 19 aboriginal phase may be
lower than anticipated.

With external headwinds on the horizon, the growth prospects of the Malaysian frugality will
also depend on what policymakers can do. Malaysian policymakers will face several
challenges in stabilizing the country’s frugality. At present, there are still significant
misgivings about the line of global profitable growth and affectation. The global profitable
retardation and inflationary pressures are imminent, but their amount and duration are
unknown. Irrespective of these misgivings, the global profitable retardation, and affectation
shocks will really impact the Malaysian frugality in the coming months. In terms of policy
responses, the near- term pretensions of profitable stabilization should continue to
concentrate on supporting domestic demand and, at the same time, neutralising the goods of
imported affectation (driven by advanced energy prices and weaker exchange rates). These
will be gruelling times for financial policy. However, a gradational upward adaptation in the
interest rate might be demanded, If affectation becomes a severe problem in the coming
months. This process has begun with Bank Negara decision to raise the late policy rate (OPR)
from 1.75 percent to 2 percent on 11 May 2022. financial encouragement might be needed to
alleviate the goods of this rate hike and support profitable growth. The energy subvention is a
double- whetted brand – it helps keep down the cost of energy for consumers but also saps
the government’s financial coffers. Government energy subventions are anticipated to
increase from RM11 billion in 2021 to RM28 billion in 2022 if oil painting prices remain
above USD$ 100 per barrel. This will shrink the country’s financial space further. The Civil
government’s debt- GDP rate was reported to be at 63.3 percent in June 2021 against the 65
percent threshold set by the congress. therefore, unless the limit for the debt- GDP rate is
raised further, the financial coffers from fresh borrowings could also be limited, especially if
the profitable recovery is lacklustre. One temporary fix is the delineation of royalties from
Petronas, which is made doable by advanced prices of oil painting exports. Tax reforms could
be another medium- term policy option but this is doubtful to take place soon, given the
menace of a general election.

Conclusion

Malaysia’s prospects for a more robust profitable recovery in 2022 have been clouded by a
number of misgivings. The transition to the Covid- 19 aboriginal phase will really increase
domestic profitable conditioning; still, the profitable earnings from lesser mobility might be
lower than anticipated. A weak labour request and sluggish domestic consumption could
affect the country’s growth prospects. A retardation in the global frugality and inflationary
shocks will negatively impact the country’s growth despite the advanced request prices for
some of the country’s exports. Inflationary shocks could be worsened by a decaying Ringgit
if the Federal Reserve raises its interest rates further to battle domestic affectation in the US.
However, policymakers may have to apply a more restrictive financial policy combined with
financial encouragement funded by debt and petroleum royalties, If affectation in Malaysia
worsens.
Part II

The coronavirus complaint 19 (COVID-19) is the most concerning content worldwide.

COVID-19 is a recently discovered coronavirus strain that will beget respiratory infections in
humans. It has surfaced in Wuhan, China (World Health Organization, 2020). The Chinese
government has informed the World Health Organization that there are several cases of
pneumonia with strange aetiology at the end of 2019. According to the National Health
Commission of China, the cases who have been infected by coronavirus may visit the seafood
request in China which sold live brutes. For case, bludgeons and rabbits. The primary host of
coronavirus is humans who eat the infected bludgeons as a source of food. still, the contagion
also can be transmitted from human to human due to close contact the coronavirus also can
be exposed by coughing and sneezing by the infected humans in 2020.

It's conceded that the tourism sector in Malaysia plays an important part in boosting
profitable growth by promoting foreign spending on goods and services in Malaysia.
However, some of the tourism assiduity will be forced to shut down due to unsupportable
losses and unfit to pay workers’ hires, If the number of excursionists continuously decreases.
At the same time, other unnecessary sectors were also forced to cease their operations during
the MCO. In case, the profitable conditioning in the manufacturing and construction sectors
was put on hold in order to control the spread of COVID-19 in Malaysia. That's why fiscal
support from also government role play during the profitable recession. From the below
conversations on the impacts of COVID- 19 to Malaysia’s frugality, as finance minister of
Malaysia, I would apply an expansionary financial policy by adding the fiscal aid provision
to small and medium-sized enterprises (SMEs). To date, the government has handed RM13.8
billion worth of pay envelope subvention via the pay envelope subvention program with
points to profit4.8 million workers and employers from small and medium-sized enterprises
(Tan, 2020). This is also to insure the business can overcome the other challenges assessed by
the COVID-19 epidemic. Piece meal from that, as a finance minister, I would give
testimonial consumption to the citizens rather than giving cash. The idea of this testimonial
consumption is to revive economic conditioning amid the coronavirus outbreak by
encouraging consumer spending on local businesses. The reason for giving testimonial
consumption is to insure the citizens consume the testimonial consumption on locally
produced goods and services, not on imported products.