World Bank reduces Malaysia’s 2018 GDP growth projection — again — to 4.7%

Malaysia’s GDP is forecast to grow 4.7% as well in 2019, with private consumption remaining the key economic driver

By NG MIN SHEN / Pic By ISMAIL CHE RUS

The World Bank has lowered its GDP projection for Malaysia to 4.7% in 2018 from 4.9% previously, as the slowdown in internal activity, alongside external trade tensions and market volatility, continues to weigh on the domestic economy.

“The revised forecast takes into account lower government spending and government investment, as well as overall lower investment from both the private and public sectors,” country economist for World Bank Malaysia Shakira Teh Sharifuddin told reporters at the launch of the World Bank Malaysia Economic Monitor December 2018 report in Kuala Lumpur yesterday.

The risks to Malaysia’s outlook are also increasingly weighed to the downside, given Malaysia’s high degree of integration with the global economy through financial and trade linkages.

“It is important that efforts to sustain growth in the near term are carefully balanced with the need to restore fiscal buffers,” World Bank country director for Brunei, Malaysia, Philippines and Thailand Dr Mara Warwick added.

The Malaysian government is also facing declines in revenue and a high level of public debt, thus leaving it with little fiscal room to deal with shocks.

Malaysia’s GDP is forecast to grow 4.7% as well in 2019, with private consumption remaining the key economic driver, Shakira said.

The revised projection for this year follows an earlier cut in October, when the World Bank slashed its expectation for GDP growth to 4.9% from 5.4% predicted in April as a result of cancelled infrastructure projects and a reduced export growth outlook.

Despite external uncertainties, the local economy is expected to be able to withstand the challenges, including the possibility of a recession in the US between 2019 and 2020.

“On a possible recession in the US, given Malaysia’s high degree of trade linkages with the global economy, there will be some spillover effects for Malaysia.

“We’ve factored this into our GDP forecast. Malaysia’s economy will continue to remain resilient,” Shakira said.

Meanwhile, the report stated that Malaysia must boost its human capital if it is to join the leading ranks of inclusive, high-income nations.

According to the World Bank’s Human Capital Index for 2017, children born today in Malaysia will reach only 62% of potential in terms of productivity and lifetime income, whereas children in high-income nations will be 74% as productive as they could be in adulthood.

Further, the country’s stunting rate for children under the age of five stands at one in five, which is considered high for the nation’s level of GDP per capita.

Malaysia’s National Health and Morbidity Survey (NHMS) 2016 estimated the stunting rate for children under the age of five to be 20.7%, considerably higher than the ave-rage of 7% for upper middle-income countries, as per World Bank 2018 data.

A comparison to NHMS 2006 also shows that the rate has increased within the 10-year period, going up from 17.2%.

Further analytical work is required to understand the underlying causes, as elevated rates of stunting are observed in both urban and rural areas, across all states, ethnicities and income levels.

Deputy Health Minister Dr Lee Boon Chye said stunting is a present problem that may carry forward into the future if not addressed correctly.

“The main areas where we get stunting are in the Orang Asli communities in the interior, and among the rural poor — mainly in the “Housing Project for the Hardcore Poor” communities, where parents don’t have enough time or enough information on how to provide good nutrition for their children,” he said.

He added that the ministry is looking “very seriously” into the issue, while expressing appreciation for non-governmental organisations that have come forward to assist in addressing the problem.