Kuala Lumpur, March 21,2023:  After a strong recovery in 2022, Malaysia’s growth is projected to moderate in 2023 due to external headwinds, and inflation to remain elevated, the International Monetary Fund (IMF) said on Tuesday.

The IMF said in a statement that Malaysia’s growth is projected to moderate to about 4.5 per cent in 2023, driven by external headwinds, reports Xinhua news agency.

Malaysia’s inflation is also projected to remain elevated at about 3.25 per cent, with likely persistence in core inflation, amid a positive output gap, and evidence of a build-up of demand-side pressures.

Downside risks, according to the IMF, are mostly external, including an abrupt global slowdown and larger than envisaged monetary policy tightening by major central banks.

Growth reached 8.7 per cent, driven by pent-up domestic demand following the reopening of the economy in April 2022 and resilient export performance, it said.

However, the IMF noted the recovery in Malaysia remains uneven with agriculture, mining, and particularly construction sectors remaining below pre-pandemic levels.

With record spending on subsidies, it also said that Malaysia’s headline inflation did not surge in tandem with global food and commodity prices but was still on the rise for most of 2022, reaching 3.3 per cent for the year.

It also said Malaysia’s inflation expectations remained well anchored.