What to look for in 2022

What to look for in 2022

AS Malaysia brings to a close another Covid-19 afflicted year, the outlook for the year ahead has been the same over the past two years.

Is it going to be a better year than what we left behind? Heading into 2021, that was the common belief and for many it has turned out worse.

Yes, the pandemic is the overarching theme but the denominator of what the country should pay close attention to is the gradual opening up to a set of new business directions and also the politics that has gripped business decisions over the past couple of years.

The economy is now on full steam ahead. With the country now unshackled by much of the constraints that has handcuffed much of the business activity, the opening up of the economic sectors together with an elevated level of a vaccinated population will offer a higher degree of confidence when it comes to engaging in business and social activities once again.

What the business sectors have to look forward to is an opened up economic sector that still remains beset with some lingering and new issues.

Sure there are issues that remain. Getting workers, especially for the labour-sensitive industries, seems to be weighing down their full recovery and limits their ability to take advantage of the high commodity prices.

Improved outlook: A saleswoman adjusts a mannequin displaying a dress at a shop in Kuala Lumpur. With the constraints off, Malaysia is economically projected to do better next year. — AFPImproved outlook: A saleswoman adjusts a mannequin displaying a dress at a shop in Kuala Lumpur. With the constraints off, Malaysia is economically projected to do better next year. — AFP

Then there are also local firms that cannot find sufficient workers to replenish their workforce.

The somewhat constant but high number of Covid-19 cases bears paying attention when it comes to business activity returning to normal but with the booster programme ongoing, it will offer some level of stability in dealing with the ongoing pandemic in Malaysia.

For sure, with the constraints off, Malaysia is economically projected to do better.

UBS expects GDP growth of 6% for Malaysia in 2022 and 5.1% in 2023, up from 2.3% in 2021, the investment bank says in a report.

It expects inflation to remain manageable with oil and other commodity prices remaining relatively high.

It is projecting the ringgit at RM4.05 to the US dollar. “Despite the proposed tax changes, we estimate consensus earnings growth of 18%/14% in 2022/2023, ex-gloves,” it says.

Other issues to watch out for are the continuous adjustments companies have to make in dealing with the environmental, social and governance (ESG) issues, which have become a big risk over concerns of labour practices in Malaysia.

Next year will also see the bounce back in business activity and that will see profits too rise. But that will be tapered by the prosperity tax, which is one-off but shaves the bottomline of the most profitable firms in the country.

Maybank Investment Bank expects investors to see convincing measures within the government’s Medium Term Revenue Strategy, which is due by the middle of next year, to sustainably broaden fiscal revenue generation and hence reduce the risk of the corporate sector continuing to be tapped to bridge fiscal gaps.

The other high impact event that will be eagerly watched will be the 15th General Election (GE15).

Expectations are that it could well be held next year but like Maybank says, any potential signs of political instability and/or policy paralysis could dampen market sentiment.

Affin Investment Bank says the landslide win by Barisan Nasional in the recent Melaka state by-election, which is in sharp contrast to the 2018 GE14 verdict, would certainly spur the prospects of an early GE15.

“We would, however, see the event as raising the risk premium for the market, given the uncertainty over an election outcome, especially after GE14 and the higher percentage of younger voters in GE15.

“Any change in the ruling government may result in not merely a U-turn in government policies but also further delays in the execution of large scale projects, which could be disruptive and could dampen the economic growth recovery,” it says.

https://www.thestar.com.my/business/business-news/2021/12/11/what-to-look-for-in-2022