KUALA LUMPUR: The local economy's strong growth will help Malaysia cushion the effects of global economic slowdown with high inflation rates especially in the US, UK and other parts of Europe. 

Universiti Kuala Lumpur's Business School economic analyst Associate Professor Aimi Zulhazmi Abdul Rashid said the 8.9 per cent gross domestic product (GDP) growth might provide pointers for the 2023 Budget.

He added that the restrictions imposed by China's government to curb Covid-19 in industrial cities had also slowed down its growth. 

"So this should give pointers to the Malaysia government in preparation of the national budget 2023, that is to stimulate the domestic economy in order to balance the global economic recession," he told the New Straits Times.  

Aimi said Malaysia might need to stimulate the domestic economy by practising fiscal and monetary policies that are out of the box such as not imposing any rate hikes to the overnight policy rate until the economy attained growth momentum equivalent to 2019. 

He suggested more spending on the fiscal policy by the government, especially the development sector and more effective control on the subsidy disbursement to the targeted groups.

As for the ringgit, he said its movement would depend on the dynamics of the United States' Federal Reserve in managing its interest rates to curb the rise of inflationary rates and tighter monetary control. 

"Based on the present trend, Bank Negara Malaysia has a big challenge to maintain the ringgit against the US dollar.

"The continuous increases of the interest rates will continue to affect the global capital market outflow to the US bond market. This flow of funds will have a strong impact on the ringgit as currency," he added. 

Putra Business School associate professor Dr Ahmed Razman Abdul Latif noted that the GDP growth in Q2 would boost investors' confidence towards Malaysia which was already reflected in the high volume of foreign direct investment in the first half of the year. 

However, he said although Bank Negara expected growth momentum to continue for the remainder of the year, the figure would not be higher than what was posted for Q2. 

"I think growth will remain positive but not necessarily higher than Q2 due to continuing uncertainties at the global stage such as Russia-Ukraine crisis, US economic recession and projected global economic slowdown," he said.