Malaysia | Fiscal stimulus primed to support the recovery
The government has announced a record spending plan in the 2022 Budget to spur the post pandemic recovery. Measures include an increase in cash aid and tax and financing support to households and businesses, as well as high multiplier infrastructure projects previously announced.
What you will learn from this report:
- We estimate that the fiscal measures will add around 0.8ppts to GDP growth in 2022, boosting our forecast to 6.8%.
- Despite the high spending projections, we forecast the deficit to narrow to 6.1% of GDP (from 6.7% this year) due to a rebound in revenues amid stronger economic growth and higher oil prices. The government also announced a one-off prosperity tax. While we believe most corporates will not meet the RM100 million revenue threshold, it may still dent investor sentiment in the short run.
- Indeed, equities fell 2.2% after the announcement. But given we estimate Malaysian equities are around 20% undervalued and growth prospects are firming, we expect any risk off sentiment to be short lived.
Finland’s growth forecast cut amid weak confidence and soaring inflation
We have lowered our 2022 GDP growth forecast for Finland to 1.5% from 1.7% last month, as weakening confidence further dampens the outlook. We expect inflation to peak higher with a greater passthrough to core prices, squeezing real incomes and denting consumption. Russia has accounted for almost 10% of Finland's goods trade, among the highest in Europe.Find Out More
Why we see eurozone inflation slowing sharply next year
We have revised our 2022 eurozone inflation forecasts sharply higher, to 6.0%, since the start of the Ukraine war, as energy and food prices began to soar and new supply bottlenecks emerged. That said, we still see inflation decelerating sharply to 1.3% in 2023, putting us below consensus. While we recognise significant risks to our views, inflation should slow to below 2% in H2 2023.Find Out More