World economy may feel ‘recessionary effects’ from Mideast tensions

GEORGE TOWN: The latest escalation of conflict between the US and Iran is seen as another contributor to the slowdown in the global economy, said economist Dr Barjoyai Bardai.

For the past two years, the world was gripped by the prolonged USChina trade war and with the current Middle East tensions, the world needs to brace for a degree of recessionary effects.

“It is a process which we have to go through as we cannot be growing all the time,” he told SunBiz.

However, he said the slowdown will eventually bottom out in the second half of the year when the global economy adjusts to the new challenges.

As for Malaysia, Barjoyai said that there would be mixed fortunes, as the country may enjoy a little revenue from the appreciation of the crude oil prices, but it is only a slight advantage as the country remains a net importer of fuel.

He said that palm oil prices may also fall as Europe may source for alternatives in view of the concerns over the environment while gold as usual should shoot up during times of conflict.

Malaysia may experience a contraction in its export volume and foreign direct investments may also fall but one can expect the ringgit to rebound this year as the greenback may weaken due to the US’ role in the conflict, said Barjoyai.

Nonetheless, consumer confidence and sentiment continues to be weak as there was a 6% drop in the consumer spending index for the last quarter because of concerns over the country’s debt and fiscal policies, he said.

He noted that the onus is on the policymakers to inject the necessary confidence back to the market.

Pollster Merdeka Centre director Ibrahim Suffian said that fortunately, Malaysia has positioned itself well to shield the working class from the living cost issue after it postponed the proposed fuel pricing rationalisation programme.

For now, the consumer price index is protected from sudden surges.