Friday 29 Mar 2024
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KUALA LUMPUR (Jan 11): The World Bank expects Malaysia's gross domestic product (GDP) growth to moderate to 5.2% in 2018, from an estimated 5.8% in 2017, on the back of a gradual slowdown in China which offsets a pickup of activity in the rest of the region.

Regional growth is projected to moderate slightly during the forecast horizon led by a cyclical rebound in several commodity exporters, the bank said in its Global Economic Prospects report.

It said the regional growth is projected to gradually slow to 6.2% in 2018 and 6.1% on average in 2019 to 2020 with the continuing gradual structural slowdown in China offsetting a cyclical pickup in the rest of the region.

"Risks have become more balanced, but remain tilted to the downside," the bank said.

On the upside, the report said the stronger-than-expected growth observed in 2017 in the largest advanced economies and emerging market and developing economies could continue in the near term.

However, on the downside, there are three major risks to the forecasts, which could be amplified by the vulnerabilities of some economies, such as elevated domestic debt, large external financing needs, and limited policy buffers.

Some countries in the region continue to face vulnerabilities in their financial sectors, with high levels of debt (in countries such as China, Malaysia, Thailand, Laos and Mongolia) as well as fast credit growth (China, the Philippines and Vietnam), the bank said.

"Regional potential growth is set to decline over the next decade, as demographic tailwinds turn into headwinds and capital accumulation slows," it said.

The report highlighted that the growth in China is projected to slow from 6.8% in 2017 to 6.4% in 2018 and 6.2% on average in 2019 to 2020, as rebalancing proceeds and credit growth decelerates.

"Policy support is expected to diminish, as monetary policy remains tight and fiscal policy becomes less accommodative," it said.

However, growth in the majority of commodity exporters, especially Malaysia, is projected to remain strong at around 5% on average in 2018 to 2020, despite some moderation in investment and export growth.

"Growth in the majority of commodity exporters is projected to accelerate, and negative output gaps — the legacy of the weakness of commodity prices in the wake of the global financial crisis — are expected to gradually close," the bank said.

 

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