The New Year begins tomorrow. In many ways, it will be a relief to say farewell to 2012, a year which has seen the advanced countries struggling amid seemingly unending economic and financial uncertainty. Naturally, the tail-end of the year is a time to look ahead with hope and expectation.
And indeed, there is growing optimism among investors about the global economy. However, is this realistic when some experts refuse to rule out the possibility of an overall contraction?
When presenting its Economic Outlook in late November, the Organisation for Economic Cooperation and Development (OECD) warned that the global economy was expected to make “a hesitant and uneven recovery” over the coming two years.
OECD secretary-general Angel Gurra pointed out that we were not yet out of the woods. “The near-term outlook is not only weak, but also downside risks predominate. The lingering euro-area crisis remains a serious threat to the world economy. At the same time, if left unresolved, the US ‘fiscal cliff' could tip the US economy into recession and weigh on global growth,” he added.
The eurozone is expected to see a 0.4 per cent contraction this year and a further 0.1 per cent fall in 2013. Even if the White House and congressional leaders can hammer out a short-term agreement on the budget that will avoid the fiscal cliff, growth in the United States is forecast to increase at two per cent next year, down from the 2.6 per cent forecasted in May.
With the United States and Europe battling to revive their economies, the OECD believes the world economy will grow by 3.4 per cent in 2013, up from 2.9 per cent this year.
This will likely be supported by the economic expansion of the likes of China, Brazil and India, although they too will be impacted by challenges faced in the West.Malaysia too will contribute to this forward momentum. Its economic performance has been strong, and it is often recognised as among the emerging economies that will have a prominent role on the world stage in the coming years.
The recent Country Brand Index (CBI) 2012-13, for example, ranks Malaysia as third among the Future 15 tomorrow's leading country brands that have ‘great potential across a variety of areas’.
Constructed annually by global brand consultancy FutureBrand, the CBI measures and ranks global perceptions around the world's nations, based on elements such as their cultures, industries, economic vitality and public policy initiatives.
Economic reforms: This year is the first time that the index report incorporate the Future 15, which reflects six future drivers: governance, investment, human capital, growth, sustainability and influence.
Published last October, the CBI 2012-13 report notes: “Malaysia's workforce, tourism and vast resources may just be the secret to its success.”
That, of course, is not the full picture. A key component of the Malaysian success story has been the sound implementation of economic reforms since the nation's independence that has transformed an exporter of raw materials into an emerging, multi-sector economy driven by exports and supported by a well-developed regulatory system.
Forward-looking planning has enabled the government to capitalise on the country's unique offering, including a rich heritage and scenic landscapes, to support a thriving tourism sector. Home to more than 15 per cent of the world's species, Malaysia is one of the world's most bio-diverse areas.
The current emphasis is on climbing the economic ladder, and this is done via government-led initiatives such as the Government Transformation Programme (GTP) and the Economic Transformation Programme (ETP), and a conscious effort to slowly liberalise sub-sectors of the economy.
Also crucial are a focus on building on the country's vast natural resources, a commitment to economic openness, and a concerted effort to drive investments in infrastructure and research and development. These are complemented by the encouragement of innovation in business and amongst the workforce, and the development of regional alliances.
Malaysia's economy has been resilient amid the challenging global economic conditions, with real gross domestic (GDP) product growth estimated at 5.1 per cent this year and five per cent in 2013, according to the World Bank.
Its third-quarter performance surprised on the upside with GDP expansion beating economists' median expectations of 4.8 per cent; year-on-year growth in the quarter was 5.2 per cent, with domestic demand fuelling economic activity and compensating for the slower export demand from major trading partners affected by the ongoing economic woes.
Domestic demand in the third quarter continued to experience double-digit growth, increasing 11.4 per cent from a year ago. The impetus for this was supplied by strong public and private sector investment.
Private investments were primarily driven by capital spending in the services sector, particularly in transportation, real estate and utilities, while public investments were mainly capital spending by public enterprises in transportation, oil and gas, education and utilities.
Endless possibilities: Commenting on Malaysia's third-quarter performance, Alliance Research chief economist Manokaran Mottain said the economy was still driven by domestic demand, led by private consumption and investment activities, which reflected the government's drive to stimulate income growth, improve and develop infrastructure, and ensure a steady flow of foreign capital.
However, Bank Negara governor Dr Zeti Akhtar Aziz cautioned that while GDP growth in the fourth quarter was likely to follow that of the third quarter, there were some uncertainties in the export sector. The central bank estimates that growth for the whole of 2012 will be at least five per cent.
The experts are cautiously confident about Malaysia maintaining its economic performance in 2013. The recent Malaysia Economic Monitor, a report by the World Bank, said Malaysia's growth would likely weather a weak global environment and would grow robustly in 2013.
Public and private investments are expected to remain strong and lend support to economic growth in the new year. Private investment is forecasted to grow at 13.3 per cent in 2013, up from 11.7 per cent in 2012, driven by the rollout of the ETP. Public investment is forecasted to expand by 4.2 per cent in 2013, as a result of higher capital outlays by non-financial public enterprises and development expenditure by the federal government.
The finance ministry has said the prospects for the services sector are expected to remain upbeat with the accelerated implementation of key initiatives under the National Key Results Area and continued investment in the seven services sub-sectors under the National Key Economic Areas.
These initiatives are geared towards driving the wholesale and retail trade, finance and insurance, and communication sub-sectors, which are forecasted to grow 6.8 per cent, 5.2 per cent and 8.2 per cent in 2013.
Though the United States and Europe have some way to go before they can again enjoy pre-crisis growth rates, Malaysia looks set to stay on its stable trajectory of growth, benefiting from wise economic planning and a steady pace of growth.
A bright future lies ahead for Malaysia, a nation earmarked to become a force that will reshape the global landscape of tomorrow. As the country plays an increasingly important role, it will no doubt offer Malaysians and the world a destination for growth and endless possibilities.—Asia News Network/The Star