While Malaysia’s expansion has been strong after the reopening of borders and amid booming exports, it must be prepared for a slowdown in the world economy, he said.

There are rising global recession risks sparked by an aggressive monetary tightening in the US and stumbling growth in China, Tengku Zafrul said.

“The International Monetary Fund (IMF) has cut its global 2022 GDP growth projections from 3.6% to 3.2%, and 2.9% for 2023, dubbing the world’s economic outlook ‘gloomy and uncertain’,” Tengku Zafrul said in an address at the Malaysian Student Leaders Summit today.

“The weaker global outlook will certainly impact us.”

Malaysia’s GDP grew 5% in the three months to March and its unemployment rate has been on a declining trend for over a year.

GDP data for the second quarter, due next week, is also likely to show strength, going by “the return of traffic jams and packed eateries”, Tengku Zafrul said.

Still, the IMF has cut its growth estimate for Malaysia to 5.1% from 5.6%, lower than the official projection for a 5.3% to 6.3% expansion this year.

“At this point, we remain optimistic that we will be able to stick to our official projections,” Tengku Zafrul said, highlighting how the monetary tightening by the Fed has led to the weakening of currencies, including the ringgit.

It recently fell to a five-year low versus the dollar.

“The risk of the US entering a recession, technical or not, makes the global outlook even bleaker,” he said.

Tengku Zafrul’s comments echo the outlook from CGS-CIMB Research, which expects Malaysia’s growth to slow to 4.1% in 2023, from an estimated 5.2% this year.

The country’s external trade will bear the impact of the global slowdown as its growth correlation with the world economy has become stronger over the past decade, the firm said last month.