China’s slowdown subduing Malaysia’s growth: KUALA LUMPUR, Sept 12 — Together with its Association of Southeast Asian Nations (Asean) neighbours, Malaysia’s economic growth has been subdued by the financial slowdown in China, according to the Asian Business Cycle Indicators released recently by the Organisation for Economic Co-operation and Development (OECD). The OECD also warned of a downside risk resulting from a possible winding down of the US Federal Reserve’s stimulus programme, and an inflation from volatile global oil prices, should political tensions in the Middle East continue. “The slowdown in China have weakened the growth momentum of Asean. “In Malaysia and Vietnam, while real GDP (gross domestic product ) improved slightly in the second quarter of 2013, underlying growth momentum was subdued,” said the report. China’s economy, the world’s second largest, expanded only 7.5 per cent in the second quarter of the year compared to the corresponding period last year, continuing its longest streak of growth below 8 per cent in at least two decades. Chinese President Xi Jinping explained last week that the government preferred to bring down the growth rate in order to solve fundamental problems, which are hampering its long-run development. However, OECD reported that its composite leading indicators suggested that the Chinese economy is now “returning to trend” and is on its way to recovery. It predicted that China’s GDP will grow up to 8 per cent by the final quarter of 2013, but conceded that it will be still be a slower rate than in recent years. Last month, Bank Negara Malaysia (BNM) announced that Malaysia’s economy grew 4.3 per cent year-on-year for the second quarter of this year, a slight increase over last quarter’s 4.1 per cent. Quarter-on-quarter, the country’s GDP grew 1.4 per cent compared to a fall of 0.4 per cent last quarter, the central bank said. In light of the modest GDP growth for the last two quarters, BNM has revised its outlook for 2013’s GDP growth from 5.6 per cent to between 4.5 and 5 per cent. “Emerging Asian economies which ran large current account deficits and more susceptible to macroeconomic risks of capital outflows such as India and Indonesia bore the brunt of the financial turmoil,” OECD’s report added. A leading accountancy and finance body had also warned last week that Malaysia’s days of growth driven by US stimulus is set to end as the Federal Reserve winds down its stimulus programme. In its Economic Insight: South East Asia report released jointly with the Centre for Economics and Business Research today, the Institute of Chartered Accountants in England and Wales (ICAEW) warned of a reduced capital flows to Asean that will likely occur once the US central bank tapers its US$85 billion (RM280 billion) monthly bonds-buying scheme. It also warned of a slowdown in export and intra-Asean consumption caused by the sluggish economy of China, which is the bloc’s largest trading partner, and the effect it has on commodity prices. ICAEW predicted that the region will now have to adapt to a slow growth period when loans are harder to get, and the cost of borrowing money increases. This follows a warning by global ratings agency Fitch Ratings last week that a slowdown in growth could hamper Putrajaya’s bid to cut its current account deficit by up to 3 per cent of the GDP by 2015. Putrajaya had last week announced a cut in fuel subsidy to consolidate its fiscal position, especially after Fitch revised Malaysia’s sovereign debt outlook from “Stable” to “Negative” last month. Malaysia’s fiscal deficit has already widened to RM14.9 billion, and runs a relatively high government debt of 53 per cent of GDP in addition to one of Asia’s highest household debt levels. Since May 9, the ringgit has fallen 8.8 per cent against the US dollar as global investors fled emerging markets, sinking the currency to a three-year low against the greenback. Average inflation has also increased to 1.8 per cent in the second quarter, up from 1.5 per cent in the previous quarter as Malaysia recorded its highest inflation rate in 14 months of 2 per cent in July. dlvr.it/3y03Pw
Posted on: Thu, 12 Sep 2013 04:40:38 +0000
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