KUALA LUMPUR: RAM Rating Services Bhd projects Malaysia's economic growth to reach 6.8 per cent next year from an estimated 3.8 per cent in 2021.
The rating agency said the low base effects will visually prop up year-on-year (Y-o-Y) gross domestic product (GDP) growth in 2022.
However, output in absolute terms was still below potential, RAM said, anticipating it to be only 4.6 per cent above 2019's output.
It added that negative output gap was expected to persist in 2022, albeit narrower than the past two years.
In its Economic Outlook 2022 report released today, RAM foresees the Malaysian economy staging a rebound on most fronts, riding the positive momentum of the country's high vaccination coverage and ongoing vaccine booster rollout.
"The resumption of most economic activities without the risk of further wide lockdowns is a key risk driver of RAM's forecasts.
"The recent emergence of the Omicron variant, while posing a potential threat, could delay recovery but not completely derail it.
"The reimposition of nationwide lockdowns is not within our current base case scenario," it said.
Meanwhile, RAM estimates a fiscal deficit of 5.9 per cent of GDP in 2022.
This is in line with the government's projection of 6.0 per cent under 2022 Budget and down from the firm's 6.5 per cent estimate for 2021.
"Better growth prospects and significant gains from one-off and adjusted tax policies are upsides to the budget, despite the higher budget allocation for 2022," it said.
It added that the fiscal space remains fairly tight, with government debt projected to amount to RM1.1 trillion in 2022 (or 65.0 per cent of GDP) and the debt servicing burden significant at 17.2 per cent of total projected revenues for the year (2021: 17.6 per cent).