KUALA LUMPUR: As external activities recover from a better global outlook, RHB Research Institute Sdn Bhd (RHB ResearcH) forecast Malaysia’s real Gross Domestic Product (GDP) to grow at a faster pace of 4.5 per cent in 2017 against 4.2 seen last year.
“This was mirrored by the rebound in the World Trade Organization’s (WTO) global merchandise trade numbers, which recorded back-to-back growth in the final two months of 2016.
After two consecutive years of slowing growth, RHB Research said the global economic outlook has shown an improvement on account of firmer activity in the US; the eurozone being out of deflation, an improving Japan’s economy; as well as some stabilization in China’s economy despite still undergoing a structural slowdown.
“Nevertheless, the improvement in global outlook is not without risks,” RHB forewarned.
“Downside risks could come from policy shifts, particularly the rising protectionist pressures in the US and disappointments from President Trump’s pro-growth policies.
“Plus, there is also the risk of the eurozone disintegrating due to populist surprises from multiple leadership elections this year.
On balance, the research firm sees global economic growth picking up to 3.3 per cent in 2017 from 3.1 per cent in 2016 and 3.2 per cent in 2015. This would ultimately lead to stronger global trade activity.
As it stands, the WTO projects the global merchandise trade to expand by 1.8 to 3.1 per cent in 2017, recovering from minus 2.7 per cent in 2016 and minus 11.8 per cent in 2015.
This bodes well for Malaysia’s exports, RHB Research said, given that it is a country with trade making up almost 130 per cent of GDP.
Nevertheless, the upside on prices moving forward is likely to be capped by rising shale oil production in the US.
At the same time, CPO prices also crept up in late 2016 due to the tight supply as a result of the El Nino weather phenomena earlier in the year and are expected to stay relatively firm in 2017.
Overall, commodity exports, which represent about 12 per cent of total exports, are expected to rebound to a growth in 2017. This was after recording back-to-back declines of 20.5 per cent in 2015 and 13.6 per cent in 2016.
