KUALA LUMPUR: Malaysia's 2022 gross domestic product (GDP) full-year growth is projected to be at 6.5 per cent on optimism with the country's imminent reopening of borders, Citi analysts forecast today.
Citi said although dampened by floods in the Klang Valley in mid December, Malaysia's fourth quarter (Q4) 2021 GDP rose a stronger than expected 3.6 per cent year-on-year (Y-o-Y) on reopening, which should continue into 2022 despite Omicron uncertainties and external demand headwinds.
Citi economist Wei Zheng Kit said while Omicron delays reopening momentum, it did not derail it, both domestically and internationally.
"Despite the recent surge in daily infections since the start of 2022, the proportion of severe cases have declined drastically, with ICU capacity utilisation rates still low," he said.
This partly reflects high and rising vaccination coverage, with 78.7 per cent of the population received two doses and 41.2 per cent received booster shots as of February 15.
Reopening has thus continued, with officials declaring Malaysia on course for a transition to the endemic phase, and a full reopening of the borders without quarantine also on the cards.
Citi said the impact could be significant as tourism receipts accounted for 5.8 per cent of GDP pre-pandemic.
Currently, countries accounting for 57 per cent of 2019 arrivals have reciprocal no quarantine arrangements with Malaysia, led by Singapore (39 per cent).
On the global front, Citi said the economic recovery and bull market were maturing, with moderate growth expected ahead.
Citi analysts expect less inflationary pressure in the coming year, albeit somewhat higher inflation over the next ten years when compared to the last decade.
The assets that perform best over the next year and beyond are unlikely to be those that rebounded most strongly in 2021.
As the inflationary boom ends, and the US Federal Reserve (Fed) possibly over-reacts, a peak in long-term yields may also define the trough for higher quality US growth stocks.
When rates do peak, and Citi analysts think that may be sooner than many expect, the pressure on growth stocks is likely to abate.
While timing is never clear with foresight, this could plausibly be after the Fed's first interest rate increase, particularly if it takes bold action with a 50-basis point increase.
"More volatility is expected in the near term, and investors should improve the quality of their asset allocation by adding exposure to high-quality assets including dividend growers, sectors with stronger returns and non-US developed markets large caps and China," Citi regional head of wealth management advisory Sumaira Franicevic said.