The Government is forecasting a real economic growth rate of
5% to 5.5% and inflation of 3% for 2014 for Malaysia. Nominal growth for the
economy is therefore expected at 8% to 9%. Can it be achieved and where will
growth come from?
With rising cost of living coupled with the prevailing high
levels of household debts, growth in consumption for 2014 and 2015 will be
lackluster. It is also the intention of the Government to rein in its own
expenditure, to reduce its fiscal deficit. No doubt measures are also needed to
broaden the revenue base of the Government and this will be achieved through
the implementation of the GST from April 2015.
So, where then will growth come from in 2014 and 2015?
This week, The Edge focuses on Exports. The week after, we
will highlight the prospects of private investments as a growth stimulus.
We looked at three exogenous variables or events to try to
understand the potential for the growth of exports for Malaysia in 2014 and
2015.
The first is the growth of the United States economy and how
it will affect the growth of exports of emerging countries in general and
Malaysia in particular.
Does a growing US economy means our exports will soon pick
up steam? What does the evidence of the last seven quarters suggests and why.
The second is the growth of the Chinese economy and its
relationship to Malaysian exports. How
far will the Chinese economy slow? What contributed to the growth of the
Chinese economy in the past and is this sustainable? How important is China to
Malaysia?
Finally, we looked at hard commodity prices. Why have prices
collapsed in the face of strong expectations of global economic recovery? Is
this not a contradiction? Were manufacturers overly optimistic and overstocking?
Is there a story the commodity markets are telling us?
Dato', I have been following The Edge's article recently especially on updates related to the State of the Nation and I must say the articles in The Edge are well written and very informative. Can I humbly suggest that The Edge team also do some sensitivity analysis on the effect of oil prices to our country's revenue and budget deficit. I remember reading that up to 47% of our country's revenue is from export of petroleum or petroleum related products. As such, if oil prices were to fall like copper and iron ore and that is a distinct possibility as shown in The Edge article where shale oil production is on the uptrend and it is widely predicted that we are at the end of the commodities super bull run, I would think that we may have some problem and it is either our budget deficit will go up or we will need some substantial increase in import to cover the shortfall. I am inclined to think that the savings from reduction of oil subsidy from drop in oil price would not be enough to offset the reduced revenue from petroleum exports.
ReplyDeleteThank you for your suggestion. In fact, the outlook for oil and its impact on Malaysia will be in a follow-up article to appear in The Edge.
DeleteWith the discovery of shale oil & gas in the US, the energy bill for manufacturing has gone down. Couple with saving on shipping charges & tariff , increasing labor cost in emerging markets have encouraged onshore manufacturing activities in US. After taken into consideration of the aforesaid factors and couple with higher productivity, the goods are more competitive now.
ReplyDeleteThe dependency of emerging economy to export to US for growth will not be that rosy as before the financial crisis.
Based on your article and my recent comments, I have tried to put some numbers into my argument. An amateur attempt as follows:
ReplyDeletehttp://businessmanagementbooksreview.blogspot.com/2014/03/malaysias-economy-why-we-should-look-at.html
Please delete the comment/link if you think it is inappropriate to post it here.