Despite gloomy predictions, economy will expand, Bank Negara assures

Bank Negara Malaysia’s economic director Mohd Fraziali Ismail, speaking to the media on ‘Trade Disputes, One Year On’, insists that talk of a global recession is being overplayed now.

KUALA LUMPUR: The US-China trade war poses risks to the global economy, but Malaysia’s resilient economy and gross domestic product growth will be able to weather any challenges, Bank Negara Malaysia (BNM) said.

BNM’s economic director Mohd Fraziali Ismail said despite the challenges, Malaysia’s economy was forecast to expand by 4.3-4.8% in 2019.

However, he warned that “the trade tension poses a significant downside risk to Malaysia’s growth following moderation in global demand, disruption in financial markets, weakness in commodity-related sectors and policy uncertainties”.

“Our diversified exports help mitigate adverse impact following the trade tension,” said Fraziali at a media engagement titled “Trade Disputes, One Year On” at Sasana Kijang, Bank Negara, here today.

He said this was further supported by integration in the global value chain.

He said the global economy was facing a lot of risks and this was not just new but associated with past global financial crises.

“Having said that, if you look at the normal indicators like inflation and unemployment, it’s lower but not outright ugly.

“It would take a lot of shocks for the global economy to move into the negative or very low range.”

Asked about talk of a global recession and slower growth for some countries, Fraziali said: “Yes, we are seeing modest growth, but we are a little bit far from recession. This is being overplayed at this point in time.”

On whether Malaysia needed to embark on additional action to prevent the economy from slipping further, he said it was not so much about ramping up or boosting to counter a recession.

Fraziali said even if the US and China went into a full-blown trade war, where tariffs are imposed on every trade, “my team estimates that global growth will be down 3% this year, compared with the International Monetary Fund’s (IMF) projection of 3.2%”.

He said this would amount to just a moderation of growth instead of a contraction, a salient feature in any global economic recession.

Fraziali added that for global standards, that would be “pretty low”, and for some countries, it would mean falling into recession, but that it would not be so big as to become a global financial crisis. - FMT