Friday 29 Mar 2024
By
main news image

KUALA LUMPUR (March 14): Malaysia, the only country among the Association of Southeast Asian Nations (ASEAN) expected to experience a drop in gross domestic product (GDP) growth this year, according to the Institute of Chartered Accountants in England and Wales (ICAEW), faces growing risk of a ratings downgrade.

In a statement today on its latest Economic Insight: South East Asia report, ICAEW said the country is the only out of the six major ASEAN economies reviewed in the report that is expected to see growth falling, to 4.2% following the 4.7% it recorded in 2015.

"The continued weakness in oil prices and the vulnerability of the ringgit to currency outflows leave the central bank little room to manoeuvre," it said.

"The long-running scandal over state investment company 1MDB (1Malaysia Development Bhd) is also eroding confidence and contributing to risk aversion across the country. With the government facing substantial challenges, the risk of a ratings downgrade is growing," an excerpt from the report read.

However, some recovery is expected in 2017 where growth is expected to hit 4.6%, the institute went on to say.

ICAEW said the effects of slower growth in China will vary across ASEAN nations, as China is the largest trading partner for Malaysia, Singapore, and Thailand.

Malaysia and Singapore, it noted, are the most vulnerable to weaknesses in the Chinese economy due to their place in the regional supply chains for electronic goods. The declining demand and prices for commodities will also be a cause for concern, it said.

Meanwhile, Indonesia, the Philippines and Vietnam are less exposed to manufacturing sectors where China has excess capacity, as their wage competitiveness also means that developments in China should not significantly constrain their continued industrialisation.

ICAEW regional director for Southeast Asia Mark Billington said as ASEAN countries continue to reform their economies and experience moderate growth in the next few years, there will still be periods of financial market volatility as they adjust to China's new growth trajectory.

"A deeper-than-expected slowdown in China will be the key threat to ASEAN economies, along with more acute financial market volatility and a tightening of financial conditions as industrialised countries normalise monetary policy. This will be particularly painful for countries with high debt levels," he said.

 

      Print
      Text Size
      Share