Malaysia’s GDP to grow 4.9%, says World Bank

by **Cals** Tue 08 Apr 2014, 12:54

Business & Markets 2014

Written by Surin Murugiah of theedgemalaysia.com

Tuesday, 08 April 2014 09:31

KUALA LUMPUR: Malaysia’s economic growth will accelerate modestly, to 4.9% in 2014, according to the World Bank’s East Asia Pacific Economic Update released yesterday.

In its report, the World Bank said Malaysia’s exports would increase, but higher debt servicing costs and ongoing fiscal consolidation will weigh on domestic demand.

Commenting on the region’s outlook, the report said developing East Asia would grow by 7.1% this year, largely unchanged from 2013.

It said that as a result, East Asia remains the fastest growing region in the world, despite a slowdown from the average growth rate of 8% from 2009 to 2013.

The World Bank said developing countries in the East Asia Pacific region would see stable economic growth this year, bolstered by a recovery in high-income economies and the market’s modest response so far to the Federal Reserve’s tapering of its quantitative easing.

World Bank East Asia and Pacific regional vice-president Axel von Trotsenburg said East Asia Pacific has served as the world’s main growth engine since the global financial crisis,”

“Stronger global growth this year will help the region expand at a relatively steady pace while adjusting to tighter global financial conditions,” said von Trotsenburg.

The World Bank said that in China, growth will ease slightly to 7.6% this year from 7.7% in 2013. Excluding China, the developing countries in the region will grow by 5%, slightly down from 5.2% last year.

The report said larger Southeast Asian economies, such as Indonesia and Thailand, would face tougher global financial conditions and higher levels of household debt.

In the Philippines, growth could slow to 6.6%, but accelerating reconstruction spending would offset the drag on consumption from the effects of natural disasters in 2013, it said.

The smaller economies are expected to grow steadily, but face overheating risks that could require further monetary tightening.

World Bank chief economist for the East Asia and Pacific region, Bert Hofman, said risks to the regional forecast remained.

“A slower than expected recovery in advanced economies, a rise in global interest rates, and increased volatility in commodity prices on account of recent geo-political tensions in Eastern Europe serve as reminders that East Asia remains vulnerable to adverse global developments.”

“Over the longer term, to keep growth high, developing East Asia should redouble efforts to pursue structural reforms to increase their underlying growth potential and enhance market confidence,” Hofman said.

The World Bank’s report said the rest of the region’s developing countries could also benefit from structural reforms, such as facilitating international trade and promoting foreign direct investment, especially in the services sector.

In this context, the establishment of the Asean Economic Community in 2015 could boost intra-regional investment and exports and provide an important source of growth, the report said.

This article first appeared in The Edge Financial Daily, on April 8, 2014.