KUALA LUMPUR (Feb 14): Malaysia’s economy is set for a gradual recovery, with real gross domestic product growth at 3.1% in 2021 and projected to accelerate to about 5.75% in 2022, thanks to the authorities’ impressive Covid-19 vaccine roll-out and swift implementation of economic policy support measures.

The International Monetary Fund (IMF) in its "2022 Article IV Mission with Malaysia" end statement released on Sunday (Feb 13) said the recovery nevertheless would remain uneven, with sizeable economic slack and substantial medium-term pandemic-related risks.

The IMF team recommended additional near-term targeted fiscal support towards vulnerable and hard-hit segments of the economy and productive investments.

It said near-term support should be combined with a medium-term fiscal consolidation plan, underpinned by budgetary reforms, to rebuild buffers and safeguard sustainability.

The IMF also said the accommodative monetary policy stance is appropriate.

It said financial-sector support measures should continue to be more targeted and unwound as the recovery becomes entrenched.

The IMF’s Lamin Leigh said coordinated and targeted structural reform policies would help address long-standing structural challenges, including the need to strengthen social safety nets, limit economic scarring and enhance economic resilience.

Leigh said that in the near term, fiscal policy should continue to be nimble and increasingly targeted, with a focus on further buttressing the recovery, minimising economic scarring, protecting the vulnerable segments of the population and scaling up productive investments, in line with the authorities’ spending priorities.

“The authorities’ commitment to medium-term fiscal consolidation is welcome.

“A credible, specific, growth-friendly and clearly communicated consolidation strategy should be implemented once the recovery is entrenched to rebuild fiscal buffers, preserve fiscal sustainability and reduce fiscal risks, supported by robust fiscal governance practices,” he said.