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Malaysia's Biggest Headwind Is Inflation, Finance Minister Says

Syaiful Redzuan | Anadolu Agency | Getty Images
  • The biggest headwind for Malaysia is rising prices caused by geopolitical tensions and supply chain disruptions, Finance Minister Tengku Zafrul Aziz said.
  • Energy prices have been elevated since Russia attacked Ukraine, while Covid measures in China have disrupted supply chains.
  • Malaysia benefits from higher commodity prices as a net exporter, but it comes at the cost of inflation for the people, Zafrul said.

The biggest headwind for Malaysia is rising prices caused by geopolitical tensions and supply chain disruptions in China, Finance Minister Tengku Zafrul Aziz said.

Economic growth in Malaysia has been strong for the first two quarters of the year and unemployment rates are falling, but challenges lie ahead for the Southeast Asian country, Zafrul said.

"We are expecting inflation to go up, we are expecting energy prices to go up, so there will be a challenge for Malaysia," he told CNBC's Steve Sedgwick at the World Economic Forum.

"The biggest headwind is the inflation," he later added, attributing higher prices to geopolitical instability, disruptions to the supply chain and Covid lockdowns in China, which is one of Malaysia's biggest trading partners.

Energy prices have been elevated since Russia attacked Ukraine, while Covid measures in China have disrupted supply chains.

Malaysia benefits from higher commodity prices as a net exporter, but it comes at the cost of inflation for the people, Zafrul said.

The country has been able to limit inflation through food and petrol subsidies, which help those who can't afford the higher prices, he said.

"We want [the] economy to continue to grow, and as such, we will continue our fiscal expansion policy with those extra revenue that we receive," he said. "But more importantly, to also cushion the impact to the vulnerable groups here in Malaysia."

Malaysia is also set to stop exporting 3.6 million whole chickens a month until prices stabilize, media reports said.

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