Here are the issues to keep an eye on in 2022:
The COVID-19 Evolution
The possibility of additional Covid-19 variations emerging in the future year will continue to wreak havoc on the global economy and jeopardise the recovery.
According to a study conducted in the United Kingdom, the newest form, Omicron, discovered by experts in South Africa last month, is two to three times more transmissible than the Delta variety. Early evidence suggests, however, that it may be less lethal than Delta. Despite this, European governments have reintroduced travel restrictions, either by closing their borders to British citizens or imposing a 14-day quarantine on them. A highly contagious variety would be terrible for the global economy because it could lead states to close their borders.
Booster shots for vaccinated individuals appear to be the best option presently, as studies suggest that they are effective against infections or acute sickness caused by the Omicron variety.
Would the coronavirus be less virulent and lethal as it expands in 2022, or will new varieties make it more dangerous?
On the local political scene, the ground continues to change
In Malaysian politics, there is never a dull moment, with numerous parties seeking to strike the correct balance given the lack of a strong majority within any coalition that had not existed prior to 2018. The political stability memorandum of understanding (MoU) between Perikatan Nasional (PN) and Pakatan Harapan (PH) settled the squabble in mid-2021, with no one ruling out the possibility of dissolution of parliament by the conclusion of the MoU period in July 2022. Regardless of the political juggling seen in 2021, Malaysia’s government is essentially the same as it was in February 2020, with the exception of Umno’s Ismail Sabri as prime minister, who could be the country’s shortest-serving leader if GE15 is called next year.
With the end of pandemic aid and measures, voting behaviour may alter, and the minimum voting age of 18 comes into force at a time when Muda, a youth-led political party, has gained a High Court order to be fully registered by the Registrar of Societies.
Political changes in Malaysia are accompanied by changes in government policies, for better or worse.
Recovery of the economic system
Following a year in which the country’s economic recovery fell short of predictions due to the rise of Covid-19 infections and consequent lockdowns, the Ministry of Finance (MoF) now expects the economy to expand at a rate of between 5.5 and 6.5 percent in 2022.
One of the most significant distinctions between the 2021 growth forecast that fell short and the 2022 forecast is that Malaysia has fully immunised 78 percent of its population. The government estimates that by July 20, 2022, the country will have reached an 80% immunisation rate, based on available data as of December 23.
According to economists, the economy would grow by 5.7 percent on average in 2022, which is in line with the MoF’s forecast.
Interest rates and inflation
Concerns about the implications of consistently rising prices on the economy have made inflation a global concern.
The recent rise in food costs in Malaysia has made headlines. The explanations range from supply chain bottlenecks and skyrocketing commodity prices to a worldwide energy shortfall and labour shortages as a result of the pandemic. The problem has been exacerbated by unfavourable weather conditions.
Most analysts anticipate that when economic activity recovers in 2022, supply limitations will evaporate, and labour concerns and high commodity prices will lessen as markets adjust.
The headline inflation rate in November was 3.3 percent, higher than the long-term average of 1.6 percent. Inflation in 2021 is expected to be between 2% and 3% for the entire year.
Economists predict that headline inflation will stay mild in 2022, ranging between 2% and 3%, while core inflation will rise but remain low.
The monsoon rains that buried portions of the Klang Valley in a sea of muddy water should serve as a wake-up call to all Malaysians and companies. The floods in mid-December were a stark reminder of how extreme weather events brought on by climate change may wreak havoc on the urban Klang Valley.
Extreme weather conditions were once thought to only affect those in the plantation industry, affecting crop yields, but as evidenced by the number of warehouses located in the Shah Alam and Klang areas that found inventory and factory machinery damaged by the floods, it is clear that businesses are also affected.
Experts fear that, as a result of climate change, such floods may occur again in the future. They claim that harsh weather also jeopardises clean water supply and food security, as well as other factors such as public health.
This recent calamity in the Klang Valley is just one example of how climate change is putting additional pressure on Malaysian businesses to embrace environmental, social, and governance (ESG) regulations.
There is more rivalry among superpowers than collaboration
The epidemic had no effect on the world’s two greatest economies’ sabre-rattling in 2021, with the United States imposing fresh trade and financial sanctions, which China replied, continuing the punishing tariffs and technology access restrictions seen in recent years.
Finance, technology, manufacturing, and energy are among the industries that have been impacted, despite the fact that US and Chinese businesses continue to seek access to each other’s markets.
Experts predict that the atmosphere will remain tumultuous in 2022, with rivalry reigning supreme over collaboration. The main concern for Malaysian businesses will be whether future penalties will harm or help their operations domestically or in China, as they did during Trump’s presidency.
“Multinational enterprises operating abroad are increasingly at risk of getting stuck firmly between US sanctions, including export bans, and Chinese countermeasures,” according to the Peterson Institute for International Economics’ June 2021 policy brief. “These pressures contribute to escalating US-China trade frictions, which are already forcing global supply chains to restructure,” the institute added.
According to the Asian Century Institute in December, continuous conversations between leaders of the two countries offer hope that things will not spiral out of hand. “These days, the United States and China disagree on almost everything. However, both are keen on collaborating where possible and avoiding open conflict.”