Malaysia is predicted to be relatively resilient among Asean economies, according to the Institute of Chartered Accountants in England and Wales (ICAEW).
In a statement on Wednesday (Dec 7), ICAEW said China’s plus one strategy, which involves the diversification of business investment and supply chain ecosystems, is vital to the growth of Asean’s economy.
Placed favourably in the diversification of ecosystems, ICAEW cited Malaysia, for instance, as being well placed to pick up mid- to high-value supply chain systems, with Indonesia looking to catch up aggressively.
ICAEW noted further that due to Malaysia’s gross domestic product (GDP) being relatively less dependent on net trade and tourism compared to other emerging economies in Asean, it is projected to also be less impacted by exogenous factors and the global recession being forecast next year.
However, Malaysia has one of the highest gross government debt-to-GDP ratios in the region, and given that the budget deficit is not projected to drop by much, ICAEW viewed that there is limited fiscal space for policy offsets, and GDP growth in Malaysia is projected to shrink from 9.2% in 2022 to 2.7% in 2023.
Meanwhile, countries like Vietnam remain a paramount source of labour-intensive manufacturing and production, and as such, ICAEW expects Asean to still see promising growth in years to come.
According to ICAEW, Malaysia's long-term growth prospects remain positive, with domestic demand in 2022 projected to contribute the highest percentage over the last two decades to GDP.
However, just as economic activity is picking up, with businesses adjusting to new ways of working and benefiting from pent-up customer demand, ICAEW noted that it now sees spiralling energy and input costs, high inflation and weak consumer confidence leading to a global recession.
Additionally, international travel to Southeast Asia is also expected to see less of a recovery in 2023 compared to the South Asia and Oceania regions.
“The global economy is facing new headwinds, partly due to Russia’s invasion of Ukraine, but also due to changes in the wider economic, social, and political landscape.
“Our institute and members will be at the forefront, as we help businesses and economies through these difficult times, much like how we did during the Covid-19 pandemic,” said ICAEW president Julia Penny during her opening address at the fourth-quarter ICAEW Economic Insight Forum webinar on Dec 1.
Key findings from the economic forecasts were presented by Priyanka Kishore, Oxford Economics' head of India and Southeast Asia macro services.
She was joined by other panellists, namely PwC Malaysia risk assurance partner Nik Shahrizal, ICAEW head of financial services Reuben Wales and World Bank Group senior economist Wael Mansour, in a panel discussion about economic transformations that countries may face following elections, long-term investment decisions, rising interest rates and inflation.
Source: The Edge Markets