Malaysia’s GDP expected to grow 5% in 2018: Report

(Bernama) – The Conference Board, a New York-based global, independent business research association, has projected that Malaysia will record a 5% gross domestic product (GDP) growth in 2018, slightly lower than the 5.5% growth forecast this year.

In its latest Global Economic Outlook 2018 released on Monday, it said Malaysia is not the only Asean country to face a decline.

Thailand’s GDP growth is also projected to decline to 3% in 2018 from 3.8% in 2017.

The report attributed Malaysia’s economic slowdown to the decline in oil and other commodity prices, which are not likely to rise above their current levels next year.

Nevertheless, the overall global economy’s momentum is expected to continue, producing a 3% global growth rate in 2018.

“Global growth has finally left the starting gate since the global economic and financial crisis, and GDP growth, which we predicted to grow at 2.8% a year ago, is likely to end at about 3% for 2017 and through 2018,” said chief economist of The Conference Board, Bart van Ark.

While the growth path of mature markets will remain solid in the short term, the potential for accelerated growth is limited, and a growth slowdown is likely to set in later in this decade.

“As some major emerging markets are maturing themselves, especially China, they are unlikely to return to growth trends of the past.

“The good news is that qualitative growth factors, such as an improvement in labour force skills, digitisation, and especially stronger productivity growth, may help to sustain growth and provide better conditions for businesses to thrive over the next decade,” he said.

The Conference Board said the growth momentum in mature economies has intensified during 2017, and is projected to grow by 2.1% in 2018 compared to 2.2% in 2017.

It said the United States’ (US) economy will benefit from carrying stronger investment growth into next year, while several European economies may see some weakening of cyclical tailwinds and fall back to their medium-term growth trend by mid-2018.

However, it projected that emerging markets will grow by 3.8% compared to 3.7% in 2017, adding that there will be significant differences across countries.

China has a somewhat stronger growth in 2017 due to a revival in exports and ample government support of the economy in the run-up to the Party Congress in October, but will continue its long, soft fall going into 2018.

“India, which had a weaker-than-expected year due to implementation difficulties with major policy initiatives, such as the demonetisation of large currency notes and the introduction of a country-wide goods and services tax, will see improved growth in 2018, largely driven by consumption,” van Ark said.

But the Conference Board also warned of risks for the duration of the current strength of the global economy, notwithstanding the stabilisation of energy and commodity prices, improved business confidence, cyclical recovery in Europe, and China’s policy-driven growth stimulus.

A weak recovery in investment, for example, may limit the speed with which technology can be translated into productivity growth, while a slowdown in consumption growth is possible in several countries, as real wage growth remains slow, even as labour markets tighten.

It said policy and geopolitical risks (Brexit, US policy, refugee crisis, terrorism, natural disasters) can interrupt the economic growth trend.

An acceleration in protectionism or a trade war between the US and China, and increased risk of political or even military conflicts in different parts of the world, are other risks that threaten stability and the growth trajectory.

Nevertheless, according to the Conference Board, several forces could help to strengthen the quality of growth and make it more sustainable over the next decade.

Labour shortages, for instance, may help to induce faster investment growth, especially in sectors with high demand for scarce talent.

“This increased capital intensity is a source of labour productivity growth, particularly for Europe, the US and other mature economies,” it said.

The Conference Board said China’s growth path had slowed down considerably and the trend will continue in 2018 with an expected 3.9% growth, down from 4.2% in 2017.

Meanwhile, it said Japan’s 2018 growth will be at 1% (1.5% in 2017).

India will continue with its growth trajectory with a projected 6.5% growth in 2018, up from 6.2% in 2017, while Vietnam will grow at 6% in 2018, up from 5% in 2017.