NEW YORK: The Conference Board, a New York-based global, independent business research association, has projected that Malaysia would record a five per cent gross domestic product (GDP) growth in 2018, slightly lower than the 5.5 per cent growth in 2017.
In its latest Global Economic Outlook 2018 released on Monday, it said Malaysia was not the only Asean country to face a decline as Thailand’s GDP growth was also projected to decline to three per cent in 2018 from 3.8 per cent in 2017.
The report attributed Malaysia’s economic slowdown to the decline in oil and other commodity prices, which were not likely to rise above their current levels next year.
Nevertheless, the overall global economy’s momentum is expected to continue, producing a three per cent global growth rate in 2018.
“Global growth has finally left the starting gate since the global economic and financial crisis, and GDP growth, which we predicted to grow at 2.8 per cent a year ago, is likely to end at about three per cent for 2017 and through 2018,” said Chief Economist of The Conference Board, Bart van Ark.
While the growth path of mature markets will remain solid in the short term, the potential for accelerated growth is limited, and a growth slowdown is likely to set in later in this decade.
“As some major emerging markets are maturing themselves, especially China, they are unlikely to return to growth trends of the past.
“The good news is that qualitative growth factors, such as an improvement in labour force skills, digitisation, and especially stronger productivity growth, may help to sustain growth and provide better conditions for businesses to thrive over the next decade,” he said.
The Conference Board said that the growth momentum in mature economies had intensified during 2017, and was projected to grow by 2.1 per cent in 2018 compared to 2.2 per cent in 2017.
It said the United States’ (US) economy would benefit from carrying stronger investment growth into next year, while several European economies may see some weakening of cyclical tailwinds and fall back to their medium-term growth trend by mid-2018.
Meanwhile, it projected that emerging markets would grow by 3.8 per cent compared to 3.7 per cent in 2017, however, adding that there would be significant differences across countries.
China has a somewhat stronger growth in 2017 due to a revival in exports and ample government support of the economy in the run-up to the Party Congress in October, but will continue its long, soft fall going into 2018.
“India, which had a weaker-than-expected year due to implementation difficulties with major policy initiatives, such as the demonetisation of large currency notes and the introduction of a country-wide goods and services tax, will see improved growth in 2018, largely driven by consumption,” van Ark said.
But the Conference Board also warned of risks for the duration of the current strength of the global economy, notwithstanding the stabilisation of energy and commodity prices, improved business confidence, cyclical recovery in Europe, and China’s policy-driven growth stimulus.
A weak recovery in investment, for example, may limit the speed with which technology can be translated into productivity growth, while a slowdown in consumption growth was possible in several countries, as real wage growth remains slow, even as labour markets tighten.
It said policy and geopolitical risks (Brexit, US policy, refugee crisis, terrorism, natural disasters) can interrupt the economic growth trend.
An acceleration in protectionism or a trade war between the US and China, and increased risk of political or even military conflicts in different parts of the world, were other risks that threaten stability and the growth trajectory.
Nevertheless, according to the Conference Board, several forces could help to strengthen the quality of growth and make it more sustainable over the next decade.
Labour shortages, for instance, may help to induce faster investment growth, especially in sectors with high demand for scarce talent.
“This increased capital intensity is a source of labour productivity growth, particularly for Europe, the US and other mature economies,” it said.
The Conference Board said China’s growth path had slowed down considerably and the trend would continue in 2018 with an expected 3.9 per cent growth, down from 4.2 per cent in 2017.
Meanwhile, it said Japan’s 2018 growth would be at one per cent (1.5 per cent in 2017).
India would continue with its growth trajectory with a projected 6.5 per cent growth in 2018, up from 6.2 per cent in 2017, while Vietnam would grow at six per cent in 2018, up from five per cent in 2017. – Bernama