IMF sees faster growth pace for Malaysia

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.