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At the height of Covid-19, Malaysia’s economy was soft and nearly lapsed into a recession.

And now in 2022, the economy is bursting into activity and is registering robust growth.

The borders have reopened, almost all Malaysians were vaccinated and unemployment rate began to fall to 300,000 Malaysians jobless from 1 million before.

The country’s economy is thriving so good that the threat of a stagflation may be on the horizon.

Is the economy headed for a stagflation?

A stagflation is a situation where the economy is registering solid growth but in the mean time, stagflation is also rising simultaneously.

Professor Dr Geoffrey Williams said there are different states or degrees of stagflation – the first is slow growth and high inflation, and the other is a recession and high inflation.

“In Malaysia, we expect slower growth than Bank Negara Malaysia’s forecast but we also expect low inflation relative to global inflation.

It is a matter of degree but for Malaysia there will be growth with manageable inflation,” the Management, Science and Technology economics lecturer told BebasNews.

He added globally some of the bigger organisations such as the International Monetary Fund are suggesting a likely recession and since inflation is high then we could call this stagflation.

“However there is evidence that inflation may have peaked, so we will have lower inflation and lower global growth which is normal.

Williams said in the 1970s, when Malaysia had a stagflation, it was due to double digit inflation and an economic recession.

“So this is normally how we understand it.”

In the US and the UK, there is high inflation but also growth. So it’s mixed actually. We are in a very uncertain period,” said Williams.

Meanwhile, Dr Ahmed Razman Abdul Latiff said even though the inflation rate is expected to gradually increase, it will be around 3 percent only and the unemployment rate is on a downward trend with the latest rate at 4.1 percent.

“The quarterly gross domestic product is also expected to remain positive for the second quarter is 2022.

“So a stagflation is very much unlikely,” the Universiti Putra Malaysia’s Business School senior lecturer told BebasNews.

” I don’t think stagflation will be coming soon since stagflation means persistent high inflation combined with high unemployment and stagnant demand in a country’s economy, of which none of these scenarios are happening in Malaysia right now.

“Our inflation rate in March is 2.2 percent, unemployment rate getting lower to 4.2 percent and we are still registering positive growth in every quarter since the fourth quarter in 2021.

So the prospect of stagflation for now is unlikely,” said Razman.

— BebasNews

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