Global, regional and local economies have been uneven and eventful year-to-date.
Continue to expect moderate pick up in global economy of +3.4% in 2014 and +3.8% in 2015.
No change in Malaysia’s real GDP growth forecast of +5.4% in 2014 and +5.1% in 2015.
Uneven global economy. The uneven global economy in 1H 2014 – characterized by an expanding G3 (US, Europe, Japan); sub-par Large Emerging Market Economies (BRIC); and a mixed Asian NIEs/ASEAN – is set to continue in 2H2014-2015.
Divergent monetary policy path. Among the major economies, the Fed and BoE are on “normalisation mode”, while the ECB and BoJ are on the opposite extreme. Within ASEAN, central banks have started the ball rolling in actualising and signaling rate hikes.
Sanguine markets are a risk. Despite issues arising from China’s shifting growth story and geopolitical developments, market volatility is at levels last seen just before the Global Financial Crisis, and global equity and bond markets powered to new heights amid the still ample global liquidity. The danger is markets are underpricing or mis-pricing risks, and we should not discount “Taper Tantrum”-like market upheavals ahead. This could well be a function of future communications by major central banks on their monetary policies - especially US Fed – which we shall term as the risk of “Normalisation Noise”.
Maintain our conservative view on global economy. We are looking at a mild pick up in global growth to +3.4% in 2014 and +3.8% in 2015 (2013: +3.0%). Our conservative view on the global outlook since late-last year is corroborated by recent downgrades in forecasts by international agencies.
For Malaysia, robust 1H 2014 to give way to tapering in 2H2014- 2015. The good news is external demand is positive for real GDP growth in 1H 2014. However, indications are that growth will taper somewhat in 2H2014-2015. This reflects the impact of fiscal and monetary policy adjustments – namely the inflationary fiscal consolidation measures such as the on-going subsidy rationalisation and the upcoming GST introduction, as well as hikes in the benchmark interest rate - on domestic demand, especially consumer spending and Government expenditures. Keeping domestic demand and GDP growth momentum intact will be investments, particularly with the acceleration in the ETP-related cornerstone projects.
Source: Maybank Research - 14 Jul 2014
Continue to expect moderate pick up in global economy of +3.4% in 2014 and +3.8% in 2015.
No change in Malaysia’s real GDP growth forecast of +5.4% in 2014 and +5.1% in 2015.
Uneven global economy. The uneven global economy in 1H 2014 – characterized by an expanding G3 (US, Europe, Japan); sub-par Large Emerging Market Economies (BRIC); and a mixed Asian NIEs/ASEAN – is set to continue in 2H2014-2015.
Divergent monetary policy path. Among the major economies, the Fed and BoE are on “normalisation mode”, while the ECB and BoJ are on the opposite extreme. Within ASEAN, central banks have started the ball rolling in actualising and signaling rate hikes.
Sanguine markets are a risk. Despite issues arising from China’s shifting growth story and geopolitical developments, market volatility is at levels last seen just before the Global Financial Crisis, and global equity and bond markets powered to new heights amid the still ample global liquidity. The danger is markets are underpricing or mis-pricing risks, and we should not discount “Taper Tantrum”-like market upheavals ahead. This could well be a function of future communications by major central banks on their monetary policies - especially US Fed – which we shall term as the risk of “Normalisation Noise”.
Maintain our conservative view on global economy. We are looking at a mild pick up in global growth to +3.4% in 2014 and +3.8% in 2015 (2013: +3.0%). Our conservative view on the global outlook since late-last year is corroborated by recent downgrades in forecasts by international agencies.
For Malaysia, robust 1H 2014 to give way to tapering in 2H2014- 2015. The good news is external demand is positive for real GDP growth in 1H 2014. However, indications are that growth will taper somewhat in 2H2014-2015. This reflects the impact of fiscal and monetary policy adjustments – namely the inflationary fiscal consolidation measures such as the on-going subsidy rationalisation and the upcoming GST introduction, as well as hikes in the benchmark interest rate - on domestic demand, especially consumer spending and Government expenditures. Keeping domestic demand and GDP growth momentum intact will be investments, particularly with the acceleration in the ETP-related cornerstone projects.
Source: Maybank Research - 14 Jul 2014
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