IMF sees faster growth pace for Malaysia

New Straits Times - - Business - In­ter­na­tional Mon­e­tary Fund

KUALA LUMPUR: Growth in the Malaysian econ­omy will quicken this year to 4.5 per cent and im­prove fur­ther to 4.7 per cent next year, says the In­ter­na­tional Mon­e­tary Fund (IMF).

In the lat­est Re­gional Eco­nomic Out­look for Asia and Pa­cific re­leased in Sin­ga­pore yes­ter­day, the IMF pro­jected Malaysia’s cur­rent ac­count balance to fall to 1.8 per cent of gross do­mes­tic prod­uct (GDP) this year and next year.

The cur­rent ac­count balance slipped to two per cent of GDP last year, mainly on weaker oil and gas trade bal­ances.

It ex­pects the Con­sumer Price In­dex to post 2.7 per cent growth this year and 2.9 per cent next year. For last year, it noted that Asean economies grew although the eco­nomic cy­cles within the re­gion con­tin­ued to di­verge.

In In­done­sia, growth ac­cel­er­ated to five per cent, sup­ported by ro­bust pri­vate con­sump­tion.

The Malaysian econ­omy saw a mod­er­ate ex­pan­sion, with 4.2 per cent growth, the slow­est rate since the global fi­nan­cial cri­sis, driven by pri­vate do­mes­tic de­mand, while net ex­ports con­trib­uted neg­a­tively.

The IMF said ex­ces­sive credit growth was de­cel­er­at­ing in many ma­jor economies in the re­gion.

“Although the credit-to-GDP gap or credit gap is de­clin­ing in economies such as Hong Kong, In­done­sia, Malaysia, Sin­ga­pore and Thai­land, it re­mains sub­stan­tial in sev­eral economies, while still in­creas­ing in oth­ers (China).”

The re­port out­look for the Asia-Pa­cific re­gion re­mains ro­bust with 5.5 per cent this year — the strong­est in the world, in fact — re­cent data pointed to a pickup in mo­men­tum.

“The near-term out­look, how­ever, is clouded with sig­nif­i­cant un­cer­tainty and risks on balance, re­mains slanted to the down­side.”

IMF warned that medium-term growth faced head­winds, in­clud­ing from pop­u­la­tion age­ing and slug­gish pro­duc­tiv­ity.

“Macroe­co­nomic poli­cies should con­tinue to sup­port growth while boost­ing re­silience, ex­ter­nal re­bal­anc­ing and inclusiveness.”

Growth in China and Ja­pan are re­vised up­ward for this year, com­pared with Oc­to­ber 2016 World Eco­nomic Out­look, owing mainly to con­tin­ued pol­icy sup­port and strong re­cent data.

Over the medium term, slower growth in China is ex­pected to be par­tially off­set by ac­cel­er­ated growth in In­dia, un­der­pinned by key struc­tural re­forms.

Any re­bal­anc­ing away from in­vest­ment and ex­ports to­ward con­sump­tion will re­duce China’s im­ports. There­fore, it is likely to have neg­a­tive spillover ef­fects, in­clud­ing through global value chains, on ex­porters of in­vest­ment and in­ter­me­di­ate goods, such as South Korea, Malaysia and Tai­wan.

The re­bal­anc­ing will likely be in favour of ex­porters of con­sump­tion goods and ser­vices, in­clud­ing through Chi­nese tourism.

Mar­kets in In­done­sia, Malaysia, the Philip­pines, Sin­ga­pore and Thai­land have un­der­gone sig­nif­i­cant cor­rec­tions since the United States elec­tion, although they have gen­er­ally per­formed bet­ter than other emerg­ing mar­kets since 2013 ta­per tantrum.

It warned that the Asian sup­ply chains linked to the US (no­tably China, Malaysia and Viet­nam) could weaken as for­eign di­rect in­vest­ment in­flows into Asia slow. Rupa Damodaran

Macroe­co­nomic poli­cies should con­tinue to sup­port growth while boost­ing re­silience, ex­ter­nal re­bal­anc­ing and inclusiveness.

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