Page 57 - KWAP_AR2022

FoR betteR PeRFoRmAnce Annual Report 2022 55

INVESTMENT REVIEW

ECONOMY, MARKET & STRATEGY

ECONOMIC REVIEW
In 2022, the global economy took a back seat as the world
focused on macroeconomic concerns. Central bankers
around the world had to grapple with high inflation shocks
and the ripple effects of the Russia-Ukraine war which
eventually led to aggressive policy tightening.

Headline inflation outlook across many developed market
economies remained complex due to higher oil and wheat
prices. In addition, a renewed rise in wholesale gas and
electricity prices also made inflation stickier. Many G10
central banks, namely the US Federal Reserve (Fed),
European Central Bank (ECB) and Bank of England (BoE),
continued to tighten monetary policy and started reductions Malaysia’s economy recorded a strong growth of 8.7%
in their government bond holdings. in 2022, the highest in more than two decades following
the modest 3.1% year-on-year growth registered
Across emerging market economies, the heavy lifting in
terms of monetary tightening was done via interest rate in 2021. Despite slower global growth, Malaysia’s
increases to combat inflationary pressures. Food and economy remained robust, driven by domestic
energy price increases led to rises in headline inflation, demand and an improvement in the labour market,
which eventually forced Asian central banks into tightening in line with the full economic reopening and transition to the
actions. In addition, other emerging market economies’ endemic phase.
central banks have been driven to hike in similar increments Meanwhile, headline inflation was contained at 3.3% in
and pace as the Federal Reserve. Meanwhile, China’s zero- 2022 attributable to softer global commodity prices as well
COVID strategy coupled with property tightening were as ongoing price controls and subsidies. Core inflation, on
undoubtedly less helpful to the rest of the world. the other hand, averaged 3.0% in 2022, higher than the
pre-pandemic average of 1.7%, driven by the continued
In short, 2022 was all about rates, central banks and inflation.
Looking into 2023, major central banks, namely the Federal strength in demand amid a still-elevated cost environment.
Reserve, are likely to taper down their aggressive rate hikes In line with that, Bank Negara Malaysia (BNM) raised the
amid concerns it could create headwinds against aggregate Overnight Policy Rate (OPR) by a cumulative 100 basis
demand. As there are clear challenges for the global economy, points (bps) between May and November 2022 to 2.75%.
a slowdown in 2023 is imminent.

3.3%
8.7%
Malaysia’s 2022 year-on-year Malaysia’s 2022 headline inflation
economic growth