English
World Bank follows IMF in cutting Malaysia’s GDP to 4.7%
KUALA LUMPUR: Barely a week after the International Monetary Fund slashed Malaysia’s economic growth forecast for 2018 to 4.7%, the World Bank has followed suit by cutting the country’s growth forecast for the second time this year.
In the 19th edition of the Malaysia Economic Monitor, the multilateral agency trimmed the 2018 gross domestic product (GDP) forecast to 4.7%, bringing the projection slightly lower than the Finance Ministry’s official guidance of 4.8%.
The downward revision was primarily due to the government’s declining expenditure as well as the lower public and private investments.
In October, the bank predicted the economy to expand by 4.9% in 2018, down from its previous forecast of 5.4% in April this year.
While the country’s growth has decelerated in the recent quarters, the World Bank country director for Brunei, Malaysia, Philippines and Thailand, Mara Warwick, assured that the economy remains resilient.
“We are encouraged to see the Malaysian government taking measures to both preserve growth, restore fiscal buffers, and improve governance.
“Such reforms will pay dividends over time, with efforts to improve not just the quantity of economic growth, but also the quality of growth,” said Warwick during the report launch yesterday.
Moving forward, the World Bank cautioned that risks associated with the Malaysian economy are increasingly tilted to the downside, especially due to the external vulnerabilities such as the Sino-US trade war and the volatility in the global financial and commodity markets.
The bank expects the domestic economy to expand by 4.7% in 2019 and 4.6% in 2020.
On whether a potential recession in the US within the next two years, as speculated by many pundits, would take a hit on Malaysia, World Bank country economist Shakira Teh Sharifuddin said “there will be some spillover effects”.
This was due to Malaysia’s high degree of trade linkages with the global economy.
“However, the potential impact has been factored into our GDP forecasts. Malaysia’s economy will remain resilient amid external shocks, supported by private consumption,” she said.
The findings of the recent Duke CFO Global Business Outlook painted a murky economic outlook, as nearly 82% of chief financial officials (CFOs) in the US expect the world’s largest economy to fall into recession by end-2020. Meanwhile, in Asia, 54% of the region’s CFOs believe their countries will be in recession no later than the end of 2019.
Last month, Harvard economist and former US Treasury secretary Larry Summers said there is a 50% chance of a US recession by 2020. Investment bank JPMorgan foresees a 35% chance of a recession in 2019, marking a sharp increase from 16% in March 2018.
Despite the increase challenges in the global economy and the slowdown in the electronic cycle, Shakira expects Malaysia to maintain a current account surplus of 2.5% in 2019.
“At the moment, we do not foresee the country falling into a trade deficit even as the US-China trade war concerns continue to persist,” she said.
Source: https://www.thestar.com.my/business/business-news/2018/12/19/world-bank-follows-imf-in-cutting-gdp-growth-to-47/#eglDlMJyxzX1IxRd.99