Bank Negara Malaysia (BNM) predicts that the country's economy will grow moderately at 4%-5% in 2023.
According to the latest Economic and Monetary Survey report, the projection was made based on the expected slow global growth potentially affecting exports.
In addition, concerns over the increase in the cost of living and input costs are expected to have an impact on household and business spending.
However, risks to Malaysia's growth projections are relatively balanced, said BNM.
The central bank sees that downside risk will be influenced by external factors such as global economic weakness due to tight monetary policy.
Meanwhile, the continued increase in tension in geopolitics is also seen to affect Malaysia's trade performance.
Domestically, BNM said higher-than-expected inflation would reduce household purchasing power, while a sharp jump in input costs could affect firm profits.
However, the strengthening of the labor market, increase in tourism activities as well as the implementation of projects may improve domestic growth prospects.
He added that domestic demand remains a pillar of domestic growth, especially private sector spending will continue to support Malaysia's economic growth in 2023.
The central bank projects Malaysia's headline and core inflation to remain high between 2.8% and 3.8% this year.
Despite that, BNM sees the outlook for inflation in 2023 as very uncertain, with risks tending to the upside.
