Malaysia’s growth prospect favourable despite weaker export outlook, says UN

Along with its regional peers, Malaysia will continue to be promising underpinned by resilient domestic demand

Malaysia's growth prospect for the year will continue to be favourable despite a tepid outlook on exports, according to a report by the United Nations (UN) released in Bangkok yesterday.

The UN World Economic Situation and Prospects 2020 stated that growth in Malaysia — along with its regional peers Indonesia, Thailand and the Philippines — will continue to be promising underpinned by resilient domestic demand.

“Private consumption will be supported by healthy labour market conditions and policy measures to boost household disposable income.

“In most of these countries, public investment growth is expected to strengthen, driven by the implementation of large infrastructure projects,” the report said.

Extended high uncertainty surrounding global trade policies, however, is expected to prolong the weakness in exports which could generate spillovers to domestic economies in these countries.

In 2019, GDP growth in East Asia slowed considerably to 5.2% from 5.7% the previous year, as high trade tensions and policy uncertainty weighed on exports and domestic demand.

Looking ahead, the UN has projected that the region would sustain a more moderate growth pace of 5.2% in 2020 and 2021.

“As business sentiments remain subdued, a strong revival of private investment appears unlikely. Nevertheless, the easing of monetary and fiscal policies across many economies in the region is likely to support growth,” it said.

The global economy suffered its lowest growth in a decade, slipping to 2.3% in 2019, according to the report.

It could, however, see a slight uptick in economic activity in 2020 if risks are kept at bay.

While global growth of 2.5% in 2020 is possible, it cautioned that a flare-up of trade tensions, financial turmoil, or an escalation of geo-political tensions could derail a recovery. In a downside scenario, global growth would slow to just 1.8% this year.

In China, GDP growth is projected to moderate from 6.1% in 2019 to 6% in 2020 with the implementation of policy stimulus measures expected to partially offset the adverse effects of the trade dispute on the economy.

Meanwhile, economic growth in South Asia is envisioned to recover to 5.1% in 2020, after falling to a decade-low of 3.3% in 2019, but will remain well below the rates seen in the recent past.

The region struggled last year with a combination of external headwinds, notably the global economic slowdown and falling trade, and country-specific internal challenges.

Nevertheless, the majority of these countries are expected to rebound as the effects on one-off shocks wane and governments respond with vigorous fiscal expansion.

Following weaker growth of 5.7% in 2019, economic growth in India is expected to recover to 6.6% in 2020, supported by fiscal stimulus and financial sector reforms.

In the Islamic Republic of Iran, the economic contraction is expected to be milder, but it will likely take several more years for economic growth to return. In Pakistan, the economy is expected to recover slightly from 2021 onward, amid the implementation of government reforms.

Source: The Malaysian Reserve 

Posted on : 23 January 2020
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Last Updated : Thursday 21st May 2020