Monday, 8 May 2017

(NST) Malaysia faces challenges to growth prospects, says research house

KUALA LUMPUR: While the stars are aligning to boost exports for Malaysia, there are challenges to its growth prospects and these include financial capacity, competition from neighbours and geopolitical tensions, said Euler Hermes-Allianz Research.

The country’s Gross Domestic Product is set to grow to 4.5 per cent this year from 4.2 per cent last year, according to the research house.

Mahamoud Islam, who is senior economist for Asia, said Malaysia's financial capacity to support growth is limited due to high public debt and household debt and lower gross national savings.

"Competition from neighbouring countries is intensifying as regional manufacturing powerhouses aggressively expand their market share, while Malaysia's market share remains stuck at around 1.2 per cent," he told a media briefing.

Rising geopolitical tensions and increasing number of protectionist measures also pose further challenges.

Malaysia, he said, would need four ‘potential forces' to help growth pick up and achieve the Gross National Income per capita to US$15,000 and that includes a more supportive business environment.

"Malaysia ranked low in the key components of contract enforcement and insolvency procedures in the World Bank Doing Business Survey."

Another game changer, he said, is for Malaysia to increase its competitiveness by investing further in innovation and infrastructure.

Digitalisation and servitisation also represents another game changer where Malaysia could make progress in the business environment and the quality of connectivity.

Malaysia ranks 36th out of 137 countries in Euler Hermes' Enabling Digitalisation Index.

The fourth game changer, added Mahamoud, is for Malaysia to deepen ties with Asean partners and also with China.