Recent economic events, particularly the fall in oil price, are predicted to significantly shade the economic outlook for Penang and for Malaysia at large.
The economy of Malaysia – and of Penang – depends to a significant degree on global trends, since both are highly exposed to externalities nowadays. The October 2014 Economic Outlook Update published by the International Monetary Fund (IMF) stated that world output growth is estimated to have remained unchanged for 2014. This is due to a mix of accommodative measures and negative forces, including uneven growth in the Euro area, weaker activity in China, continued strife in the Middle East, and geopolitical tensions between Ukraine and Russia. However, the growth is likely to be reckoned by stronger employment growth and a healthier housing market in the US, improved lending conditions in the Euro zone, and sturdier domestic Ripples from global events threaten local economy Recent economic events, particularly the fall in oil price, are predicted to significantly shade the economic outlook for Penang and for Malaysia at large demand in emerging market and developing countries.
Figure 1 shows the GDP growth for selected economies in the world vis-à-vis Malaysia. As can be seen, the growth in emerging market and developing countries surpassed the growth in advanced economies. While advanced economies are anticipated to have grown by 1.8% in 2014 and will expand 2.3% in 2015, the growth in world output is projected to have remained at 3.3% in 2014, and it is expected to grow by 0.5 percentage point in 2015. Likewise, it is estimated that growth in emerging market countries had continued to expand but at a slower rate of 4.4% in 2014 compared to 4.7% in 2013 due to weaker residential investment in China.
Malaysia, on the other hand, is predicted to have grown at 5.9% in 2014 and will grow by 5.2% in 2015, outpacing the overall projected growth in emerging market and developing countries.
The prospects remain uneven across countries within the groups. Among the advanced countries, growth is estimated to have picked up in the Euro area in 2014, with a positive expansion of 0.8%, and in the US, with 2.2%, but to have been slower by 0.6 percentage point in Japan (Figure 2). However, growth in Japan may have been weaker than expected as the Japanese economy shrank at a 1.6% annual pace in the third quarter of 2014, leaving the country in a technical recession. Among major emerging markets, growth is projected to have remained strong in emerging Asia, with a moderate slowdown in China and a steady pickup in India and Malaysia.
