KUALA LUMPUR: Malaysia’s projected gross domestic product (GDP) growth rate of 4.5% to 5.5% for 2015 remains one of the world’s best growth forecasts, thanks to its strong fundamentals, robust trade and strong monetary policy, said the World Bank.
“First, the 4.5% to 5.5% [GDP] growth estimate is much higher than the world average [of 3.5%], and certainly higher than any of the industrialised countries,” the World Bank’s regional vice-president for East Asia, Axel van Trotsenburg, told The Edge Financial Daily in an interview.
“The ability of this country to maintain healthy growth rates, is not a small achievement in an environment where the international economy is fraught by uncertainties,” he added.
Malaysia’s GDP growth projection is in line with the Asean-5 economies consisting of Malaysia, Indonesia, Thailand, Singapore and the Philippines, which is expected to expand by 5.2% this year, according to the International Monetary Fund.
This compared to a projected global growth for 2015 of 3.5%, the US of 3.6% and Europe of 1.2%. In Asia, the IMF is predicting growth of 6.8% for China and 6.3% for India this year.
Van Trotsenburg pointed out that in spite of the headwinds facing the Malaysian economy — falling commodities prices, a weakening ringgit and higher household debt — Malaysia’s trade is still holding up.
“Malaysia is one of the most open economies in Asia — its combined exports and imports are estimated at almost 150% of GDP.
“That is required to maintain a competitive economy and Malaysia has shown that it is capable of doing it,” he said.
Van Trotsenburg, however, stressed the need to keep a balanced view of the local economy as it is backed by a “very strong” financial system that is able to withstand challenges in the external environment.
“You can always add every negative development in the world to make this for a very negative scenario. But overall, one should not be distracted by the fact that this is a very robust economy,” he said, commending local policymakers’ decisive stance in responding appropriately to crisis situations.
When asked about the impact of the European Central Bank’s (ECB) recently-announced quantitative easing (QE) on Asian markets, he pointed out that there is a need to also consider the degree of European trade among the various Asian nations.
“We have to put the policy in Europe into proper context in Malaysia as well, in that its main trading partners are not in Europe but mainly in Asia. So Asian policies matter relatively more [to Malaysia] than policies in Europe,” said Van Trotsenburg.
According to MIDF Equity Research in its weekly funds flow report on Jan 26, all the markets it tracked recorded positive flows after the ECB announced its QE programme, except for Malaysia which still recorded a marginal net outflow during the week the QE was announced.
Nevertheless, Malaysia experienced its smallest foreign net outflow since the start of 2015, to a net outflow of US$41.47 million from a net outflow of US$396.07 million.
Van Trotsenburg noted that the Asean integration initiative is key to increased trading activity among Asean countries as there are “enormous opportunities and possibilities” to intensify trade of both goods and services.
Malaysia will be taking the lead in the Asean integration movement as the chairman of Asean this year.
While Van Trotsenburg acknowledged that weakening crude oil prices, which have more than halved since peaking in June last year, has impacted the country’s oil revenue, he said Malaysia’s revised fiscal deficit target of 3% of GDP for 2015 to 3.2% is still likely to be met.
“I have right now no basis to challenge that it is wrong. We actually see the future of Malaysia quite positively and we think it will have a bright future,” he added.
This article first appeared in The Edge Financial Daily, on February 6, 2015.