Alliance Bank's Market Insights Seminar -Malaysia: Turning around, looking for growth-

Agenda

• Global economy is gaining momentum
• A broadening base for domestic growth
• But, there are risks to our macro story
• Conclusion

Key messages

Global economy on upswing, but risk remain

• Global outlook remains favourable (Trumponomics)
• Confidence rising, sustained recovery in manufacturing and trade
• Policy reforms to raise the growth potential; declining productivity growth

Policy risks and financial vulnerabilities could temper the momentum

• Hopes fading if outcomes fall short of market expectations
• Potential disruptions: inward-looking policies, Brexit’s negotiation & geo-politics
• Volatility induced by the withdrawal of monetary easing
• Unsustainable asset prices, credit growth and debt implosion

Malaysia faces challenges in a position of strength

• The Malaysian economy is gaining ground but growth remains vulnerable
• Step-up structural policy actions to boost growth potential and productivity
• Address as well as contain vulnerabilities to build economic resilience

Conclusion

1. The global economy is in a synchronized expansion of economic activities. It is a mutual reinforced economic upswing in both advanced and emerging economies.
2. Policy uncertainty will remain in 2018, and the risks include unexpected changes in monetary policies and the shrinking of the Fed’s balance sheet, the financial-sector uncertainty in major economies, as well as geopolitical tensions. Pressures for protectionism are building up.
3. The Malaysian economy remains on track for expansion, firing on twin engines (2017E: 5.5%; 2018F:5.1%).
4. Strengthening policy space, addressing vulnerabilities, and enhancing international competitiveness by promoting investment, services, high-end manufacturing and FDI would also boost economic resilience and improve growth prospects.
5. Reaping digital technologies dividend requires the right policy mix and investments such as software and hardware investment, soft skills and the right ecosystem to harness information, communications and technology (ICT) and e-commerce to deliver increased productivity and growth.