KUCHING: Despite the global economic environment expected to be prone to disappointing growth in 2013, Malaysia is still hoped to see positive growth of five per cent in gross domestic product in 2013.
According to economist Patricia Oh from the research division of TA Securities Holdings Bhd (TA Research), the global economic environment will be prone to disappointing growth in 2013 as the frustratingly slow economic recovery in developed economies would particularly hold back the global economy from a strong rebound during this fiscal year.
“Based on the recent report by the World Bank, global growth is expected to remain relatively weak at 2.4 per cent in 2013 following an expansion of about 2.3 per cent last year,” she noted in her report on global economic outlook.
“As for Malaysia, the World Bank anticipates an expansion of five per cent for 2013 versus its growth expectations of 5.1 per cent in 2012.
“The economic revival has been driven by the robust domestic demand in China, Indonesia, Philippines and Thailand. More recently, both the industrial production and exports have strengthened.”
Elsewhere, Oh said the reserves position remained strong and served as buffers against unanticipated headwinds while overall macro policies stayed accommodative in the low inflation environment.
Despite this contentment, the economist believed there would likely be fiscal tightening with plans to reduce the subsidies on fuel.
“Overall, the level of output should grow decently. Backed by the full level of employment, growth will be supported by domestic-oriented activities such as construction and services,” she opined. “Barring strong headwinds externally, the manufacturing and sub-related sectors are likely to regain some traction in the later part of 2013.”
Sturdy domestic demand could potentially alleviate the external downside economic risk and concerns arising from the slowdown in external demand, the economist added.
“Specifically, domestic investments and inflows of foreign funds through the 10 National Key Economic Areas under the Economic Transformation Programme will augur well for future expansion of key economic segments,” she highlighted.
On a regional basis, Oh said output response would improve in Asia despite growth in East Asia and Pacific region declining to 7.5 per cent in 2012. The economist further added that growth was mostly hampered by the weak external demand and policy actions in China.
“Going forward though, there will be continued domestic demand, improved global financial conditions and boost in the area of trade,” she expected. “The World Bank anticipates the East Asia and Pacific to grow by 7.9 per cent in 2013 while this bloc excluding China will probably expand by 5.8 per cent.”
Oh cited several risks ahead for global growth including ineffective reform policies in the eurozone, stumbling progress to outline a credible consolidation plan in the US, significant consequences should China unwinds its unusually high investment and interruption to global oil supply and a resurgence in the price of traded food commodities.
“Specifically for the East Asian economies, the forthcoming challenges for 2013 will be derived from all of the aforementioned,” she said. “The region is in fact vulnerable to sources of external instability owing to the significant degree of integration especially through trade.
According to the World Bank, East Asia and Pacific may suffer a one percentage point (pp) decline in GDP should the Euro crisis unfolds. Aside from that, failure to resolve the both the debt and fiscal concerns in the US will reduce growth by 1.1pp.
“Also, a precipitous 5pp decline in investment growth in China will shave off 0.6 per cent from the GDP of regional trading economies.”