Friday, 14 March 2014
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?