Global economy under higher risks

  • Economy
  • Saturday, 03 Nov 2018

No. 1 trade partner: A refinery in Wuhan, China. Currently, China is Malaysia’s largest trading partner, constituting 13.5 of total exports in 2017. — Reuters

RISKS for the global economy have tilted further towards the downside despite a projected expansion of the global economy, according to the Economic Outlook 2019.

This is due to the anticipated tariff increase by the US which will likely escalate into retaliatory trade actions by its trading partners.

In addition, tighter financial conditions in several advanced economies may cause fluctuations in exchange rates and further reduction in capital inflows to emerging markets, the report said.

Other downside risks include geopolitical tensions, domestic strife as well as economic and humanitarian costs of weather-related events and natural disasters.

Overall, it said that global growth is expected to remain favourable at 3.7% in 2018 and 2019 supported by the stable growth in the US and in most emerging market and developing economies.

Growth in the advanced economies is expected to expand 2.4% in 2018 and 2.1% in 2019 while in the emerging market and developing economies it is expected to sustain at 4.7% in both this year and the next.

Growth in the US is expected to record a marginal slowdown mainly due to the recently introduced trade restrictive policies. In 2019 the US economy is projected to moderate to 2.5% compared to an anticipated growth of 2.9% in 2018.

Domestic demand in the US will continue to sustain growth amid heightening policy uncertainties and medium-term vulnerabilities, mainly due to dampening exports and rising public debt. Capital spending is expected to grow by 6%, mainly contributed by private fixed investment which may increase 6.9%.

However, US private consumption is expected to slow down at 2.5% due to gradual hikes in the interest rate and exports are expected to decelerate to 2.7% from 5.2% in 2018.

Meanwhile, growth in the eurozone is expected to ease due to lower domestic demand and exports.

Japan is also expected to record slower growth due to weak private consumption and investment, according to the report.

Over in the UK, GDP growth is expected to moderate due to low business confidence stemming from uncertainties as Brexit negotiations are ongoing.

While economic growth in the emerging markets and developing economies is expected to be uneven due to various factors including the rising oil prices, higher yields in the US, appreciation of the US dollar, ongoing trade tensions and geopolitical conflicts.

Over in China, growth is expected to moderate due to the tightening in financial sector regulations and weakening exports while India’s economy, on the other hand, is expected to improve due to domestic demand after adverse effects from currency exchange initiative and the introduction of the goods and services tax wear off.

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Business , economic report 2019


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