IMF upgrades outlook for Malaysian economy

KUALA LUMPUR: The International Monetary Fund (IMF) has revised its forecast on Malaysia’s economic growth to 4.8% for 2017 based on favourable economic data so far this year.
“We have upgraded Malaysia’s growth outlook to 4.8% for this year. We see a successful effort to increase the sustainability of debt which is on a downward path and a very steady hand in monetary policy for Malaysia. There are upside risks to this forecast so we are optimistic here in Malaysia,” said IMF chief economist Dr Maurice Obstfeld.
Speaking at a press conference on the World Economic Outlook Update yesterday, he said Malaysia’s growth forecast for 2018 has also been revised upward to “close to 5%”. IMF’s initial forecast for Malaysia’s economic growth was 4.5% and 4.7% for 2017 and 2018 respectively.
On international trade and the issue of protectionism, he said it is not a recent problem as an upsurge in barriers and protectionism measures across many, if not all the G20 countries has happened since the global financial crisis.
Although the coverage of those measures is still not that high, he said it has not been a major drag on world trade, which the IMF thinks is due to slow growth and investment seen over the last period since the global financial crisis.
“What will happen in the future, we don’t know. There has, of course, been rhetoric from several corners but we haven’t seen a lot of action with the major exception of the US withdrawing out of the Trans-Pacific Partnership (TPP), which for a number of countries in this region and also for countries like Indonesia which might have hoped to join later, is a big setback in my opinion,” he added.
Obstfeld said with investment picking up, IMF expects to see more trade globally and also inter-regionally.
“In this particular region, TPP would have been a major stimulus to trade in the region but it is not going to happen. But there are other initiatives out there that might go further in promoting trade in the region. We always prefer more multilateral solutions and bigger deals because with regional agreements there is always the danger of trade diversion, overwhelming trade creation,” he added.
He said initiatives to lower barriers are welcomed but cautioned against discriminatory initiatives.
IMF maintained its global growth projections at 3.5% and 3.6% for 2017 and 2018 respectively. For Asean-5 countries namely Indonesia, Malaysia, the Philippines, Thailand and Vietnam, the growth projection was up 0.1 point to 5.1% for 2017 and unchanged at 5.2% for 2018.
On issues that could derail its projected growth rate for 2017, Obstfeld said problems in the area of trade policy are definitely a risk.
“We identified high valuations in asset markets, the possibility of a correction. We identified the risk of a sudden financial tightening which might particularly have an adverse effect on emerging markets but might also impinge on highly indebted corporates and sovereigns elsewhere in the world,” he said.