Vietnam, Malaysia recovery to accelerate in 2022—World Bank

Vietnam, Malaysia recovery to accelerate in 2022—World Bank

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  • Vietnamese economic recovery is likely to accelerate in 2022, with GDP growing by 5.5% from 2.6% in the year just ended
  • The Malaysian economy is projected to expand by 5.8% in 2022 after growing by 3.3% in 2021
  • Both countries face serious downside risks, particularly the unknown course of the pandemic and continuing global uncertainties

Vietnam’s and Malaysia’s economies are forecast to expand this year but both outlooks remain subject to a number of downside risks, according to new reports from the World Bank.

Vietnamese economic recovery is likely to accelerate in 2022 as GDP growth is expected to rise to 5.5% from 2.6% in the year just ended, the World Bank said in its economic update on Vietnam.

“Vietnam had a turbulent year in 2021. Despite a strong start in the first semester, the COVID-19 outbreak in April derailed recovery and led to extensive human and economic costs. Vietnam’s economy is estimated to grow by 2.58 percent for the year,” the report said.

Should the COVID-19 pandemic be brought under control at home and abroad, the forecast envisions that Vietnam’s services sector will gradually recover as consumer and investor confidence firms, while the manufacturing sector benefits from steady demand from the United States, the European Union, and China.

The rebound of the economy this year will be supported by a more accommodating fiscal policy, at least in the first part of 2022.

In the medium term, full recovery of the economy to a pre-pandemic level is only expected in 2023, with the full recovery of domestic demand and barring new shocks.

The outlook, however, is subject to serious downside risks, particularly the unknown course of the pandemic. Outbreaks of new variants may prompt renewed social distancing measures, dampening economic activity. Weaker-than-expected domestic demand in Vietnam could weigh on the recovery.

In addition, many trading partners are facing dwindling fiscal and monetary space, potentially restricting their ability to further support their economies if the crisis persists, which in turn could slow the global recovery and weaken demand for Vietnamese exports, the World Bank said.

On the other hand, the Malaysian economy is projected to expand by 5.8% in 2022, as domestic demand recovers and exports expand, according to the World Bank’s latest Malaysia economic monitor.

The forecast for the year ahead follows growth estimates of 3.3% in 2021. It remains clouded by several downside risks from global uncertainties around the pandemic, supply disruptions and weaker-than-expected global and regional growth.

“The pandemic has further constrained Malaysia’s already limited fiscal space. Government revenue is expected to decline while rigid expenditures remain high. Therefore, the government should accelerate efforts to rebuild fiscal buffers by collecting more and spending better,” said Ndiame Diop, World Bank country director for Brunei, Malaysia, Philippines and Thailand.

To ensure Malaysia fulfills its growth potential in the next coming years, the World Bank said it is critical for the country to address pre-existing gaps as well as newly emerged challenges from the crisis.

Photo by Huyleictu

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