World Bank: Malaysia's growth will continue at its slow pace this year

by **Cals** Wed 27 Jan 2016, 05:46

World Bank: Malaysia's growth will continue at its slow pace this year

By Billy Toh / theedgemarkets.com | January 26, 2016 : 7:56 PM MYT

KUALA LUMPUR (Jan 26): The pace of growth in emerging markets, including Malaysia, will continue to slow this year, said World Bank's senior country economist for Malaysia Rafael Munoz Moreno.
The World Bank is forecasting Malaysia’s economic growth at 4.5% in 2016 and next year.
Moreno pointed to external developments such as the rebalancing of China's economy away from investment to consumption, that had impacted Malaysia’s economic performance last year and continuing into 2016.
"The decline in commodity prices, especially crude oil, remains on its downtrend from 2015," he said, speaking at the Malaysia's Economic Outlook session at the 18th Malaysia Strategic Outlook Conference 2016 today.
"The US' economic expansion remains slow, but committed to its monetary policy normalisation.
"(Meanwhile,) private debt and credit growth in emerging markets, including Malaysia, have not improved," he added.
On Malaysia's deficit target of 3.1% that was made in the Budget 2016, Moreno noted that the goods and services tax and subsidy reform have helped in meeting this target.
“I believe that it is possible (to achieve the target,) but it depends on a lot of other factors as well. But we’re seeing a government that is committed to this reform,” said Moreno.
While lower oil prices have helped to contain the country's inflation, higher costs of living will reduce private consumption growth, he added.
Morena also stressed that Malaysia’s government needs to stay the course, as there is not much room for counter-cyclical fiscal and monetary policies.
Macroeconomic prudence needs to be continued, as the external pressures are expected to stay, he said.
"Structural reforms are required to improve public sector performance. Tax administration needs to be improved and ways of increasing non-tax revenue from government-linked companies, need to be examined.
"Expenditure efficiencies such as consolidation of administration to improve targeting of social assistance programme, improve value from public procurement, better integration of current and capital expenditures, and to enforce establishment control and improve wage bill management," he added.
On the United States-led Trans-Pacific Partnership (TPP) agreement, Morena is of the view that it will accelerate reforms in the country. "This will also help in the removal of trade restrictions, as Asean has more restrictive trade policies for the services sector, compared with other regions."
He said the debate on the pros and cons of TPP are good, but focus should be on how to fully utilise the opportunities and benefits that are presented with the pact.